Philippine business confidence slips to 20.9% as inflation hits 7.2%

Philippine businesses turned less confident about the next three months in September, with the three-month ahead confidence index falling to 20.9% from 24.6% in August, according to the Bangko Sentral ng Pilipinas' latest business expectations survey. The central bank said optimism for the period was driven by expected higher activity during the holidays and the rice harvest, but the reading was the weakest since July's 3.7%.

The survey, which covered 515 firms nationwide between 4 and 30 September, showed firms' own-operations outlook darkening. The three-month ahead volume of business activity index slid to 31.9% from 42%, and the employment outlook index fell to 10% from 13.4%. The share of firms planning to expand in the fourth quarter, however, rose to 23.1% from 12.4%.

Current-month sentiment stayed negative at -8.4%, an improvement on August's -10.9%. The central bank said firms blamed elevated fuel and energy costs and rising prices, along with Middle East tensions, peso depreciation and weather-related disruptions. Headline inflation accelerated to a more than three-year high of 7.2% in September, taking the eight-month average to 5.4% and marking a seventh straight month above the BSP's 3% target.

Firms' financial condition index improved to -19.8% from -24.9%, while the credit access index held at -7.2%. Average capacity utilisation in industry and construction edged up to 73.5% from 69%, with stiff domestic competition, insufficient demand and high interest rates named as the top constraints. The Monetary Board raised its key policy rate by 50 basis points to 5.5% last month, a fourth consecutive hike.

The year-ahead confidence index slipped to 26.5% from 36.4%, and the 12-month employment outlook dropped to 14.4% from 30.7%. Firms still expect inflation to breach the BSP's 4% ceiling, projecting 5.7% for 2027, with 43.9% citing further oil price rises and 19.7% pointing to pressure from the weak peso, which hit a record low of P64.17 to the dollar on 27 October. The central bank forecasts inflation averaging 6.1% this year and 6% next, returning near target only in 2028 at 3.3%.