Vietnam’s Consumer Price Index Declines Despite Positive Economic Signs for the Country

March 5, 2015 Posted by Vietnam Briefing Reading Time: 4 minutes

Hanoi – Vietnam’s consumer price index (CPI) has turned negative after the finish of the Lunar New Year (Tết) holiday, falling 0.05 percent in February from the previous month. This is the first time Vietnam’s CPI has decreased during the Tết holiday, the country’s busiest shopping season of the year. However, there were positive economic signs in other areas, particularly with regards to inflation.

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The General Statistics Office of Vietnam (GSO) has reported that the negative CPI growth was the result of the price decreases in three out of 11 of the items in the consumer basket: traffic, housing and building materials, and telecommunications, which decreased 4.41 percent, 0.41 percent and 0.02 percent respectively, compared to January of 2015. A cut in fuel prices from VND1,460 to VND1,900 (US$0.68 to US$0.88) per liter was a major catalyst for the decline in CPI, contributing to the weakest rate of consumer price inflation in the last decade.

The other eight items in the consumer basket saw small price increases, as follows:

Food – 0.53 percent
Beverages and cigarettes – 0.56 percent
Garment, Footwear and Hats – 0.45 percent
Household appliances and goods – 0.31 percent
Medicine and healthcare – 0.04 percent
Education – 0.03 percent
Culture, entertainment, and tourism – 0.05 percent
Other goods and services – 0.74 percent

During the same period, Vietnam’s basic inflation rate edged up 2.4 percent over the first two months of 2015, however it is still in a very manageable area. The State Bank of Vietnam (SBV) has stated that dealing with inflation is its first priority and it will aim to stabilize and develop the national macro-economic environment. Since the high inflation rate of 18.13 percent in 2011, the SBV has implemented a number of strategic solutions focused on curbing the high rate. These actions have lead to continuing declines in inflation over the recent years: 6.81 percent in 2012, 6.04 percent in 2013, and 4.09 percent in 2014. The SBV is targeting to keep inflation under five percent in 2015.

In other positive economic news, according to the Government, the Index of Industrial Production has seen positive movement over the past two months, jumping 12 percent over the same period in 2014. Moreover, the Purchasing Managers’ Index reached 51.7 in February, up marginally from the reading of 51.5 in January – any number over 50 shows that the economy is expanding. Additionally, ANZ reports that February consumer confidence in Vietnam climbed 6.9 points to 142.3, well above the average of 133.3 during the previous year.

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