BUSINESSES were less pessimistic in May, the Bangko Sentral ng Pilipinas (BSP) reported on Friday, but consumer sentiment plunged in the second quarter amid differing views regarding the impact of the war in the Middle East.
The confidence index (CI) in the latest Business Expectations Survey (BES) improved to -25.2 percent from -35.8 percent in April, while that in the Consumer Expectations Survey (CES) dropped to -42.0 percent from -15.8 percent in the first three months of 2026.
A negative CI means pessimists outnumber optimists. Both surveys used to be conducted on a quarterly basis, but the BSP shifted to a monthly BES this year in a bid to more closely monitor business sentiment.
The BES improvement was attributed to expectations of higher consumer spending and corporate earnings along with lower oil prices and energy costs.
Consumers, however, said they were concerned about higher fuel and food inflation, graft and corruption, and an insufficient government response to the impact of the US-Iran war.
Sentiment moving forward improved among businesses, with the CI for three months from now turning positive at 0.6 percent from -7.5 percent in April. That for 12 months from now surged to 27.8 percent from 19.5 percent.
Consumer confidence for the next quarter, on the other hand, deteriorated to -16.3 percent from 1.8 percent three months earlier, while for the next 12 months it slid to 0.2 percent from 9.6 percent.
BES gains
Businesses, the BSP said, expect growth prospects to improve in August for the manufacturing, construction and business process outsourcing sectors.
The year-ahead outlook improvement, meanwhile, was said to be due to expectations of easing inflation and oil price pressures, a possible end to the US-Iran war and a recovery in investor confidence.
Sentiment about financial conditions and access to credit was less negative in May (-25.7 percent and -7.3 percent, respectively, from -35.5 percent and -9.9 percent) and respondents tagged domestic competition, a lack of demand, high interest rates and oil prices as constraints to operations.
Firms said that they intended to hire more workers over the next three and 12 months, but the number of those planning to expand operations fell amid continued uncertainty.
Businesses also expect inflation to remain above the BSP’s 2.0- to 4.0-percent target — 5.9 percent from 4.2 percent in April — in the year ahead, with concerns focused on the Middle East war, higher energy costs and supply constraints and a weaker peso.
The outlook for the currency was that of depreciation in May and three months from now but rebounded to appreciation for the year ahead. Peso borrowing rates were also seen increasing over all three periods.
Households ‘more guarded’
Consumers, meanwhile, expect to spend more on essential goods and services but do not plan to buy big-ticket items such as cars and houses.
“Households are also less likely to borrow and save, reflecting a more guarded outlook on their finances,” the BSP said.
The inflation expectation among consumers rose to 3.3 percent, within the BSP’s target, but rose from 2.7 percent in the first quarter. Respondents tagged rising food and utility costs, insufficient government policies and tighter supply conditions as the main concerns.
Consumers also expect unemployment to increase, the peso to depreciate and borrowing costs to rise over all three periods.
The May BES was conducted from May 5-31 and covered 502 companies nationwide, with a 44.8-percent response rate. The second-quarter CES, meanwhile, ran from April 6-18 and involved 5,503 households across the country, with a 98.4-percent response rate.
The surveys, the central bank said, are surveillance tools used in considering the formulation of policy and responses to domestic and global developments.
