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CPI posts negative growth for second month

Published on July 26, 2012 by in VIETNAM

HCMC – The national consumer price index (CPI) is down an estimated 0.29% month-on-month in July, marking a second consecutive month of negative CPI growth and sparking concerns over deflation.

According to the General Statistics Office, four out of the 11 groups of items used for CPI calculation have seen their prices falling this month, while others have marked up slightly. Price drops in several groups of items, including the most-weighted group, food and catering services, have pushed the CPI down further.

Particularly, food and catering services have dipped 0.47% versus June, with food and foodstuff down 1.49% and 0.45% respectively. Food catering services, however, have picked up 0.51%.

The group of housing, power, water, gas and building materials has recorded a month-on-month decline of 0.93% although power prices were hiked on July 1 and water prices in some localities are now calculated in accordance with the new price frame issued by the Ministry of Finance on July 11.

Given the fuel price cut on June 21, transport prices lost 2.71% against June. The fuel price increase on July 20 is not factored in this month’s CPI as the time for collecting CPI data was over then.

The post and telecommunications group has continued the price decline trend by going down 0.3% this month.

Among the commodity groups with price rises in July, medicines and healthcare services have posted the strongest growth of 3.36%. The remaining groups, namely garment and footwear; household utensils and appliances; education; culture, entertainment and tourism; and other goods and services, have risen a slight 0.46%, 0.4%, 0.11%, 0.22% and 0.4% respectively.

Overall, as of this July, the CPI has edged up 2.22% against December 2011 and 5.35% year-on-year. These are both low figures, consistent with the inflation target of the Government.

However, the negative CPI growth reflects the severely weakening consumption, meaning consumers are doing serious tightening.

For instance, at this time in the previous years, when the weather is hot and the new school year is about to begin, the demand for uniforms and footwear often surges, pushing up prices in this commodity group. Still, prices of garments and footwear have inched up a mere 0.46%.

This is also the group of items with a high volume of unsold products, so producers and distributors have launched various promotion programs and offered massive discounts. These solutions, however, have yet to be as successful as hoped.

Representatives of many garment and footwear firms told the Daily that they had never witnessed such a high level of inventory like this before, which exerts great financial pressure on their business.

Experts said risk of deflation is looming large and there must be timely measures to encourage consumers to spend.

Speaking to the Daily, economist Vu Dinh Anh said deflation occurs when CPI growth stays negative for at least one quarter. Despite the negative indices in two consecutive months now, he forecast CPI would not plunge below zero in the coming months if consumption rose again and prices of power, water, medicines and healthcare services were revised up further.

Therefore, it is now important to improve consumer demand to prevent a further economic downturn and production stagnation, Anh said.

The General Statistics Office remarked CPI has gone down 0.36% in urban areas, versus 0.24% in rural areas. All localities have reported CPI declines this month.

 
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