CPI reduced: Consumers benefited?

Although many different prediction on the consumer price index (CPI) in 2014 could be only at 2.7% compared with the 5% of inflation control projected by the government, the prices are considered as favorable for consumers on their low increment.

People are still spending

According to the General Department of Statistics, November CPI decreased by 0.27% lower than previous month, marking the 2nd reduction in 2014 and the lowest level in 10 years. Of the reduction, the groups of foods and catering services are accounted for the largest proportion of CPI calculation for their decline by 0.03% from the previous month. On the reduction line gradually established, CPI of foods also reduced by 0.1%. Prices for outside family dining foods stay unchanged from the previous month. Besides, the group of housing, construction materials, electricity, water supply, and gas has also fell by 0.74% from the previous month, holding the second largest weighting coefficient. In November, gasoline prices fell 2 times at dramatical amounts. This has created downside tendency for the related goods or services  creating inflation controlling effects and optimism of producers and consumers.

Consumer demand tends to increase at the end of the year. In this photo: Customers are choosing promotional items at Big C (in Thu Dau Mot City). Photo: T.Huynh

In conditions of low CPI increment, for the past days, pessimistic evalution of the overall economic situation, especially the disparity of  CPI growth of only 2.6% in November while the government is aiming to control inflation by 5%. The results show a decline in aggregate demands of the economy. And, this is not a positive signal. But in stark contrast, some others believed that reduced purchasing power has not been mainly attributed for low inflation because total retail sales of goods and social services in November of this year was still higher than the same period of 2 years ago. Thus, policy makers could be considering the increase of prices to stimulate production.

However ther evaluation could be made, the mentioned reality was seemingly proved to be untrue to the majority of consumers, especially those with low income and wage earners. This was because the fact that everyone could have planned their spending based on monthly income. Ms. Le Thi Ngoc Dung in Chanh My Ward of Thu Dau Mot City said that the humber hike of market price in 2014 hardly affected people's lives. Earning VND 7 million a month, she and her husband could make ends meet in the face of current consumption market prices.

In the province, the 2014 total retail sales of goods and services have reached VND 103,493 billion, up by 24.9% compared with 2013. This suggests that despite difficulties remained, the abundant supply of goods and services under stable prices prompts people to keep good spending. This is one of the important basis for enterprises in the province to boldly prepare their production business plans for the time to come.

The effective management of cash flow

Representatives of Big C announced the year 2014 as a year of many challenges to businesses, but the Big C company members have been on track of non-stop innovation efforts and service quality improvement in the local price stabilization and strengthening transitions of goods to rural and remote areas, as well as promotional activities in Vietnam and foreign countries. Therefore, Big C system could still maintain and develop stable business. Similarly to Big C, preparing for the end of the year, Binh Duong CoopMart has also been negotiating with suppliers to plan early orders to minimize price fluctuations and stabilize prices so that consumers would come to purchase more for higher profits.

Meatime, enterprises engaged in production for exportation said that although the CPI of low growth due to lower prices of some essential materials such as gasoline, business spending remained bullish due to requirements for higher wages and workers' year-end bonuses. Thus, the enterprise should fall for reasonable behaviors. Mrs. Nguyen Thoi Hoa Binh, Director of East-West Company Limited (in Tan Uyen Town) asserted that, despite low CPI, it was of great concerns for enterprises to manage cash flow effectively with faster circulation. When cash flow is offered with low interest rate, the profits grows; however, due to input cost of higher labor payments and market competition, the enterprises must manage their cash flow well. On the human side, the current market competition is fierce, so, it is demanding for businesses to plan operations and the appraising of consumer tastes to meet such demands. Thereon, markets could be suitably exploited for higer sales and profits.

A common behavior before the low growth of CPI is that businesses launch reduction of commodity prices and higher service quality to stimulate shopping needs. To do this, enterprises would surely cut down expenses, especially indirect expenses. Either ways, the businesses are now heading for production of lowest costs; and thus, this is a  very good sign for the economy.

Reported by Truc Huynh – Translated by Vi Bao