By Katherine K. Chan, Reporter

Philippine business sentiment rebounded in June after three consecutive months in negative territory, supported by lower oil prices and a pickup in consumer spending as schools reopened, according to the Bangko Sentral ng Pilipinas (BSP) monthly Business Expectations Survey (BES). The turnaround comes as a relief for an economy where household consumption accounts for roughly three-quarters of GDP, making business and consumer confidence closely tied indicators of near-term growth momentum.

The survey yielded a current-month confidence index (CI) of 0% in June, a marked improvement from -25.2% in May. A zero CI indicates that optimists and pessimists are roughly equal in number. A positive reading means more respondents are optimistic than pessimistic, while a negative reading indicates the opposite.

"Philippine business sentiment improved in June as firms expected lower oil prices and energy costs to support increased business activity during the period, results of the latest Business Expectation Survey show," the central bank said in a statement on Friday. "BES data also show firms anticipated a boost in consumer spending following the reopening of schools during the month."

Firms also turned more optimistic about both the third quarter and the coming 12 months. The three-month-ahead CI stood at 18.8%, up sharply from 0.6% in May, driven by expectations of stronger household consumption and easing inflation pressures. The year-ahead CI climbed to 42.4% from 27.8%, as businesses anticipated firmer demand for goods and services alongside improved local and global economic conditions, partly reflecting hopes for a resolution to the Middle East conflict.

Despite the brighter outlook, surveyed firms still expect inflation to exceed the BSP's 4% ceiling — the upper bound of the central bank's 3% ± 1 percentage point target band — projecting a year-ahead rate of 5.6%, down from their 5.9% estimate in May.

"Businesses that expect higher inflation were concerned about higher energy cost and supply constraints, the ongoing Middle East conflict, (and) peso depreciation," the central bank said. The Philippines is a net oil importer, leaving it exposed to global energy price swings that ripple through transport, food, and utility costs.

Headline inflation averaged 4.8% through June as elevated oil prices and spillovers into other key commodities continued to push the reading beyond the BSP's tolerance range. The central bank projects full-year inflation to average 6.4%.

Tighter Financial Conditions

Philippine firms reported tightening financial conditions even as credit access eased slightly, citing stiff domestic competition, insufficient demand, and broader financial concerns.

The financial condition index — which reflects firms' general cash position, including cash holdings and loan repayment terms — worsened to -26.8% in June from -25.7% in May.

The credit access index, which captures the external financing environment such as the availability of credit from banks and other financial institutions, improved to -5.7% from -7.3%.

Average capacity utilization in the industry and construction sectors rose to 73.9% in June from 70.5% the previous month.

The employment outlook index declined to 1.8% for the next three months from 11.9%, and to 20.2% for the coming year from 20.4%. The pullback in near-term hiring plans alongside rising expansion intent suggests firms may be prioritizing capital deployment over headcount growth as they navigate elevated costs and still-tight cash positions.

Nevertheless, more firms signaled willingness to expand. For the next quarter, 20.4% said they plan to boost operations, up from 9.7% in May. For the year ahead, 18.7% expressed expansion intent, compared with 11.8% a month earlier.

"Overall, the favorable business outlook could support economic growth for 2027," the central bank said.

The BSP surveyed 515 firms nationwide between June 5 and 30, comprising 193 from the National Capital Region (NCR) and 322 from areas outside the NCR.