Inflation is cutting into Vietnam volumes, Nielsen says

Inflation is cutting into sales volumes in Vietnam and has hurt consumer confidence, said Darin Williams, the managing director of Nielsen Co. (Vietnam) Ltd., speaking at a meeting in Ho Chi Minh City.
Vietnam’s inflation rate reached 23.02 percent in August, the fastest in 33 months and the 12th straight increase in the figure.

Higher costs for wages, imported raw materials, fuel and electricity, and weaker real consumer spending have led to a deterioration in corporate profits, Credit Suisse Group AG said on Monday.

Most Vietnamese industries have slowed down and manufacturers face “a very difficult situation,” with some companies in the consumer-products industry facing “very, very tight” cash flow, Williams told a business group in the country’s largest city on Tuesday. Base-goods industries that have been hit hard in particular include beverages, cooking oil and instant noodles, he said.

Higher prices for raw materials mean that if some companies “didn’t raise their prices, they’d be out of business fairly soon,” Williams said. “You’re seeing prices moving through the economy and you’re seeing the volume growth greatly impacted,” he said, with the impact being felt among both Vietnamese and foreign companies.

Some industries in Vietnam have proved more resilient, such as healthcare and family products, Williams said.

Impact on laborers

“It’s certainly not across the board,” Williams said. “There are certain pockets that are faring better than others and certain demographics that are going to fare better than others,” he said, with upscale buyers hurt less than laborers.

Vietnamese companies are highly dependent on imported capital goods and raw materials, the costs of which have been driven up by dong devaluations, Credit Suisse said on Monday in a research note.

“There is evidence to support that high inflation and macro uncertainty are starting to take their toll on consumer spending,” wrote Karim Salamatian, a Bangkok-based analyst at Credit Suisse. “Real retail sales growth has been negative for three consecutive months.”

HSBC Holdings Plc, which cut its Vietnam growth forecast for 2011 to 5.9 percent from 6.1 percent on Tuesday, said Vietnamese inflation will “ease only very gradually.”

“The fight against rising inflation is not done yet,” wrote Trinh Nguyen, a Hong Kong-based economist at HSBC, in a note Tuesday. “The government faces a tough decision between aggressively fighting stubborn inflation and guarding against a weaker global economic backdrop.”
Bloomberg

Tags: Vietnam retail, vietnam retail industry, Vietnam retail market, Vietnam super markets