Philippine business confidence improves, hiring outlook strengthens

Philippine businesses remained pessimistic in August but showed a marked improvement in confidence, while more firms expected to hire workers over the next year as demand prospects strengthened, the Bangko Sentral ng Pilipinas said.

The overall business confidence index rose to minus 10.9% in August from minus 20.3% in July, meaning pessimists still outnumbered optimists but by a smaller margin.

The improvement matters for households and the broader economy because stronger business confidence can translate into increased hiring, production and investment, although firms continue to face inflation, high operating costs and other pressures that could restrain those gains.

Businesses attributed their less pessimistic outlook mainly to expectations of stronger demand for essential commodities, loan products and construction activities.

The detailed August Business Expectations Survey showed that 80% of respondents explaining the improvement cited higher demand for goods and services.

Despite the improvement, firms continued to flag adverse weather, elevated inflation, persistent oil price increases, cautious consumer spending on leisure and travel, and higher production and operating expenses.

Businesses were considerably more upbeat about the months ahead.

The confidence index for three months ahead climbed to 24.6% in August from 3.7% in the July survey, while the index for the next 12 months rose to 36.4% from 29.4%.

For November 2026, 52.9% of positive responses cited stronger demand for consumer and financial products and services, while 23.5% pointed to increased business activity during the holiday and rice harvest season.

The longer-term outlook was also supported by expectations of improving consumer spending in tourism, construction, education and financial activities, cited by 41.7% of positive respondents.

Another 25% cited easing inflation, while 13.9% each pointed to a possible resolution of the Middle East conflict and improvements in business operations.

Improved investor confidence was cited by 11.1%.

The brighter outlook is beginning to show in employment intentions.

The employment outlook index for the next 12 months jumped to 30.7% in August from 9% in July, indicating that more firms plan to add workers.

The BSP said expectations of stronger consumer spending, easing inflation, a possible resolution of the Middle East conflict, better business operations and stronger investor confidence helped drive firms’ hiring plans.

The prospect of more hiring is particularly significant for households because improved employment can support incomes and consumer spending, which in turn feeds back into business demand.

Expansion plans, however, did not strengthen alongside hiring intentions.

The share of industry firms planning to expand over the next 12 months fell to 17.1% from 20.8% in July, suggesting companies remain cautious about committing additional capital despite their improved outlook.

Financial conditions were described as less tight in August, although access to credit became slightly tighter.

Average capacity utilization among industry and construction firms edged up to 69% from 68.6% in July.

Firms identified stiff domestic competition, insufficient demand and high interest rates as their leading business constraints.

Inflation remained a major concern despite the more favorable business outlook.

Businesses placed their year-ahead inflation forecast at 5.4%, slightly lower than in July but still above the BSP’s 4% upper bound for its inflation target range.

Among firms anticipating higher inflation, 23.1% cited continued oil price increases, 20.5% pointed to uncertainty over the resolution of the Middle East conflict and 15.4% cited declining purchasing power of the peso.

The survey also showed businesses expected inflation and peso borrowing rates to increase in the current month, three months ahead and 12 months ahead.

Respondents expected the peso to depreciate against the U.S. dollar in August but appreciate three months and 12 months ahead.

The BSP said it continues to monitor developments in the Middle East and their potential effects on business and consumer sentiment, spending and investment.

Such indicators form part of the information considered by the central bank in making monetary policy decisions.

The August BES was conducted from Aug. 5 to 31 and covered 501 firms nationwide, including 195 companies in the National Capital Region and 306 outside the NCR across all 18 regions.

The respondents were selected through stratified random sampling from the Bureau van Dijk database of the Top 7,000 Corporations based on total assets in 2017.

The nationwide survey had a 45.7% response rate and a sampling error margin of plus or minus 6.4 percentage points.