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Lower consumer price increases do not mean deflation
The consumer price index (CPI) in Hanoi decreased by 0.07% in March after it increased in January and February. The CPI decrease has sparked the worry about deflation. However, the Ministry of Industry and Trade has denied the deflation.
CPI down in Hanoi, up a little in HCM City
On March 19, statistics agencies announced that the CPI in Hanoi in March dropped by 0.07% in comparison with the previous month, meaning that the CPI increased by only 1.22% in the first three months of the year in comparison with the end of 2008. If comparing with the same period of last year, the CPI increased only by 12.34%.
In March, three out of ten groups of commodities in the basket of commodities for CPI calculation saw prices decrease. The foodstuff price decreased the most sharply by 0.71% in comparison with February, while the food price increased slightly by 0.02%.
The other seven groups of commodities saw the prices increase but insignificantly. Apparel, hat, and footwear prices increased by 0.5% over the previous month, while education, healthcare, and entertainment services saw the increases of between 0.12-0.39%.
The gold price in Hanoi in March rose considerably by 6.13%, while the dollar price increased by 0.03% over February.
In HCM City, the consumer prices in March 2009 increased slightly by 0.03% over February, which means the 1.38% in CPI increased in the first three months of the year in comparison with the end of 2008. If comparing with the same period of the last year, the CPI increased by 11.67%.
Construction materials proved to witness the highest price increase (0.82%) over the previous month, followed by drinks and tobacco (0.6%). While the food price increased sharply by 4.66%, the foodstuff price decreased by 1.43%.
This does not mean inflation
As such, the CPI increases in big cities have been slowing down, which has raised the worries about deflation.
However, the Director of the Domestic Market Trade Policies Department under the Ministry of Industry and Trade affirmed that the CPI performance in March and the first months of the year prove to be on the normal track, while denying the worry about the inflation.
“Only Hanoi and HCM City have released figures about CPI increases, while we don’t have the common figure for the whole country. I have discussed this with the General Statistics Office and I have been told that the CPI increase in March would be 0.3%,” Xuan said.
He added that the 0.3% CPI increase proves to be nearly the same with the figure forecasted by the Taskforce on Domestic Market Regulation.
“We should not make the conclusion that we are facing deflation as soon as we see the CPI decrease or increase slightly. We need to consider the purchasing power on the market as well,” Xuan said.
“We still can see the total retail turnover in March increasing, though with slower pace than previous months. We need also to update the food prices in the Cuu Long River Delta,” he added.
The CPI increased by over 1% in February only, while it increased insignificantly in January and March. The slight increases came after the continued decreases in the last three months of the year. This has reminded people of the pessimistic forecast about Vietnam’s GDP growth rate at 0.3% given by The Economist for 2009.
However, Xuan said that the forecast 0.3% GDP growth rate proves to be ‘too pessimistic.’
“I think that the 3-4% GDP growth rate would be reasonable for Vietnam in 2009,” Xuan said.
VietNamNet, VnMedia
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