CPI slowdown fails to calm enterprise fears anxiety

Improved consumer price index for August has done little to assuage enterprise fears about weakening consumer demand in the country.

Many cash conscious consumers are too afraid to spend up
The General Statistics Office (GSO) last week reported a slowdown in consumer price index (CPI) growth for August. The month saw the CPI rise 0.93 per cent month-on-month, on the heels of a figure of 1.17 per cent in July.
This is the first time monthly CPI has come in under 1 per cent since August last year. But, such a number is not enough to ease the anxiety of enterprises.
“We don’t sense any positive signals of cooling inflation over the past month. The negative impacts of inflation seem to be growing day-by -day because the level is now too high,” said Vo Quoc Thang, chairman of Vietnam Young Entrepreneurs Association.
According to GSO, the CPI rise of 0.93 per cent month-on-month in August means year-on-year inflation hit 23.02 per cent. Food and foodstuffs rose 27.87 per cent and 38.81 per cent respectively. Drinking product and tobacco prices climbed 12.82 per cent, clothes and footwear were up 13.33 per cent and accommodation and construction materials saw a 23.76 per cent hike.
Thang, also chairman of leading private domestic firm Dong Tam Group, said the business community’s chief concern was not the high lending interest rate applied at commercial banks but declining demand in the market.
Consumer confidence in Vietnam slumped by 8 points, from 105 to 97, in the first half of this year, according to a survey of The Nielsen Company. Inflation remained a challenge with 64 per cent of Vietnamese consumers indicating now was not the time to buy, stated the global market research firm.
Nearly 90 per cent of consumers claim they have changed their spending habits in the last year to save on household expenses.
“With high lending interest rates, we can try to maintain production. But the situation is becoming worse and worse because of a narrowing market,” said Le Quoc Khanh, general director at domestic Nam Ha Viet Company, a soldering stick manufacturer.
He said revenue at his company had significantly declined since early this year because of falling demand.
Figures from GSO show that industrial inventory ratio as of July 1 had surged 16 per cent year-on-year. The highest ratio was seen for furniture products with 92.4 per cent. This was followed by electric wire at 73.5 per cent and non-alcohol drinks with 84.4 per cent. The figure for beer was 71.6 per cent.
Thang said the government’s tightened monetary and fiscal policies were a step in the right direction and “essential to resolve the inflation issue”. But, he said the government should take steps to boost consumption in the country.

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Posted by VBN on Aug 29 2011. Filed under Economy News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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