Philippine consumer spending poised for modest recovery as inflation eases

Philippine consumer spending is expected to recover in the second half of 2026, but marketers should not expect a major spending boom as households remain cautious amid elevated prices and weak economic growth.

Household consumption grew by 2.8% year-on-year in the second quarter, down from 5.2% in the same period last year and 3% in the previous quarter. It marked the weakest growth since the first quarter of 2021, when household spending contracted by 4.8%.

Arsenio Balisacan, secretary of the department of economy, planning and development, said consumption could improve if inflation continues to ease and public infrastructure spending accelerates. “You don’t expect a major reversal but gradual [recovery],” Balisacan told local media.

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Inflation remains a key factor shaping household purchasing power. Headline inflation eased to 6.2% in July from 6.4% in June, although average inflation for the first seven months of the year stood at 5%, above the government’s 2% to 4% target range.

For marketers and retailers, however, the approach of the Philippines’ so-called “ber” months may not automatically translate into stronger sales.

Steven Cua, executive director of the Philippine Amalgamated Supermarkets Association, said supermarkets do not expect a significant increase in sales volume during the months leading up to Christmas.

The cautious outlook comes as several areas of household spending weakened in the second quarter. Transport spending contracted 7.5%, while alcoholic beverages and tobacco fell 1.9%. Recreation and culture declined 0.8%, while restaurants and hotels slipped 0.2%.

Food and non-alcoholic beverages remained the largest category, accounting for 36.3% of total household spending.

Still, Balisacan believes stronger government infrastructure activity could create a broader economic lift. Public infrastructure projects are expected to stimulate private construction and generate spillover effects that could eventually support household spending.

“When public infrastructure projects are underway, it influences private sector construction, so it generates multiplier effects across the country,” he said.

In the second quarter, however, public construction plunged 32.4%, while overall construction contracted 14.8% year-on-year. Gross capital formation also declined 9.2%, marking its fourth consecutive quarter of contraction.

Consumer sentiment is another factor weighing on the outlook. Balisacan pointed to the need for legislation that could improve perceptions of governance following the flood control corruption scandal, which has also affected confidence.

“Hopefully, we can get inflation to decline and Congress will deliver the legislation that could help improve the perception about our governance,” he said.

The longer-term picture also raises questions about the sustainability of consumption-led growth. Consumption remains the main driver of the Philippine economy, but Balisacan said the country needs to diversify its growth drivers by attracting more investment, strengthening high-value exports and revitalising agriculture and industry.

The World Bank has also projected domestic consumption growth of 3.5% for 2026, down from 4.6% in 2025, warning that elevated prices could push consumer growth to its weakest pace in six years.

As households remain price-sensitive, the coming holiday season could favour brands that can demonstrate value while giving consumers a compelling reason to spend.

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