As investors, a forward-looking approach is definitely an essential way to optimize our investment decisions. Given this, there are several ways that we can use to essentially look into what the future holds for us.
One of these methods is through the BSP’s Consumer Expectations Survey (CES), which they define as a tool that captures the economic outlook of consumers as an indication of the country’s future economic conditions.
Where are we now?
BSP’s CES report for the fourth quarter of 2024 showed some improvements with confidence for the current quarter improving by 4.5ppts to end up at -11.1 from last quarter’s -15.6.
This reflects a gain in the number of optimists, attributable to several factors such as higher and additional sources of income, more working family members, and, lastly, more available jobs and permanent employment.
While this marks a massive improvement relative to pandemic levels wherein the index was hitting below -50, the current quarter’s negative number is still much lower than pre-pandemic’s positive 1.3.
Where are we going?
Alongside the index’s aforementioned improvement for the current quarter, we also noticed that the outlook for both the next quarter and the next 12 months also posted gains of 3.5 percentage points (ppts) and 2.5 ppts, keeping the numbers at positive levels of 4.2 and 12.4, respectively.
Consumer spending, primed for recovery
There are even more reasons aside from the CES that further lend weight to our belief that consumer spending would continue to ramp up this year.
Number one, moderating inflation. While the PSA recently reported that inflation accelerated for the third consecutive month to +2.9 percent, inflation remained well within the BSP’s 2-4 percent target range, and the overall downtrend remains intact.
Number two, wage hikes. The Regional Tripartite Wage Productivity Boards (RTWPBs) approved wage increases ranging from P21 to P75 per day for all the 4.9 million minimum wage earners in the private sector. It will be executed in two tranches, the first of which will be effective on Jan. 12, 2025, while the second tranche will start on July 1, 2025.
Once this string of wage hikes takes effect, we believe that this would result in the stimulation of consumer spending, which in turn would push GDP higher to our estimate of 6 percent for the year, aligning with Department of Budget and Management’s (DBCC) 6-7 percent forecast.
Stock market beneficiaries
The Philippine stock market has several names that we think would benefit from this turn of events. One of these would be Puregold Price Club Inc. (PGOLD) as they have exposure to both the lower- to middle-income segment through their Puregold stores and to the higher-income segment through their S&R stores.
Another name in mind would be Monde Nissin Corp. (MONDE) as they dominate both the biscuits (28.5 percent market share) and noodles (67.3 percent market share) segments with their flagship brands: Skyflakes, Fita, and Lucky Me! Noodles.
To sum it all up, we discussed several key factors that we can take into account when creating our investment decisions. Gathering and analyzing macroeconomic data helps us understand where the market could potentially head, giving us a greater potential to pick the right stocks that will benefit from emerging macroeconomic trends.
