The above-target inflation the past couple of months have failed to dampen consumer spending as Filipinos remain optimistic, Fitch Solutions, a unit of Fitch Group said yesterday. It projected the growing labor market would further push consumer spending.

The unit of Fitch Group noted the declining unemployment, as well as the rising remittance from overseas Filipinos, will continue to support our household consumption this year until 2019.

“Our favorable outlook for the Philippine consumer is further underpinned by an improving labor market,” Fitch Solutions said as it added that its trend analysis on consumer and retail showed that spending has risen this year and will continue to do so until next year.

Data from the Philippine Statistics Authority showed the country’s unemployment rate declined to 5.5 percent in June 2018 from a high of 6.6 percent in March 2017.

1.8 million jobs

Labor Secretary Silvestre Bello III said that at least 625,000 jobs were generated this year in the industries sectors and another 742,000 net employment were created by the services sectors. These jobs offset the decline in job availability in the agriculture industry which was hit by recent natural disasters, he said.

The Duterte administration’s massive “Build, Build, Build” infrastructure program is also capable of creating 1.8 million in direct and indirect employment, said Transportation Secretary Arthur Tugade.

But more importantly, Fitch Solutions said domestic workers would have more money on their pockets in the coming months as the Department of Labor and Employment is set to announce minimum wage hikes in several more regions.

But the think tank said best consumer prospects would remain concentrated in urban retail areas such as Manila, Quezon City, and Davao.

Strong remittance

According to Fitch, the strong remittances from overseas Filipinos will continue to support consumers’ purchasing power in 2018 and 2019.

Fitch Solutions has seen the strengthening of the United States dollar against the Philippine peso to back remittances inflows and spending.

“With over 2.5 million Filipinos living and working in the US, Philippine households will continue to receive a large share of remittances in US dollar and therefore depend on the strength of the US dollar,” Fitch Solutions said.

“Philippine households receiving remittances denominated in US dollar will see purchasing power rise with the US dollar appreciating against the Philippine peso, buoying essential spending categories such as food and clothing,” it added.

Upbeat consumer confidence

But it also noted that inflationary pressures would remain a risk to consumer spending. Despite the pickup in inflation, Fitch Solutions said consumer confidence in the Philippines remains high.

Its MasterCard Consumer Confidence survey in December 2017 showed that consumer confidence in the Philippines stood at 94.5, higher than the 91.6 index in December 2016.

Filipino consumers’ confidence is also one of the strongest in Asia, scoring higher than China’s 92.2, Cambodia’s 92.2 and Myanmar’s 91.7.

“The consumer outlook for the Philippines remains bright on the back of a strong economic growth trajectory, high levels of remittance inflows and falling unemployment,” Fitch Solutions stressed.

“Nonetheless, the Philippines remains one of the strongest consumer growth markets in Asia, and this continues to present significant opportunities for consumer-facing companies,” it noted.