Business firms expressed stronger confidence on the economy for Q1 2023, Q2 2023 and the next 12 months as the overall confidence indices (CIs) during these periods significantly increased from the previous quarter’s survey result.
This means that the percentage of optimists increased and outweighed the percentage of pessimists during the reference periods.
For Q1 2023, the more upbeat outlook of respondents was attributed to expectations of: (a) higher consumer demand for products and services, (b) full reopening of the economy and return to pre-pandemic normalcy as more COVID-19 restrictions are lifted, (c) increased business activities and sustained economic recovery, and (d) expansion and new business opportunities in healthcare, manufacturing, and construction sub-sectors.
Business sentiment across all sectors is more optimistic for Q1 2023. The CIs of all sectors (i.e., industry, construction, services and wholesale and retail trade sectors) increased in Q1 2023, suggesting a more optimistic business outlook for the current quarter.
Business outlook across all types of trading firms is generally more upbeat for Q1 2023. Across different types of trading firms (i.e., exporter, importer, dual-activity and domestic-oriented), business sentiment was generally more upbeat for Q1 2023, except for exporters whose outlook was less optimistic.
Capacity utilization rises for Q1 2023. The average capacity utilization in the industry and construction sectors for Q1 2023 rose to 74.8 percent from 72.1 percent in Q4 2022.
Firms expect financial condition and access to credit to be less tight for Q1 2023. Firms expected that their financial condition and access to credit to be less tight for Q1 2023 as their corresponding indices improved, but remained negative.
Firms expect a stronger peso, and higher borrowing and inflation rates for Q1 2023 and the near term
For Q1 and Q2 2023, and the next 12 months, businesses expect that the peso may appreciate against the U.S. dollar and the peso borrowing and inflation rates may rise.
Although businesses expect that inflation may breach the upper end of the National Government’s 2–4 percent inflation target range for 2023-2024, inflation expectations among businesses may ease in the near term as the number of respondents who expected higher inflation declined compared with the Q4 2022 survey results.
Particularly, businesses are expecting that inflation for Q1 2023, Q2 2023 and the next 12 months may average at 7 percent, 6.9 percent, and 6.6 percent, respectively.