For the first time in 40 months, the national consumer price index (CPI) has turned ‘negative’ in June, dipping 0.26 percent, according to the general Statistical Office (GSO).
With this negative growth, the six-month CPI rose just 2.52 percent compared to December 2011 and 12.2 percent compared to a year ago, the GSO reported on June 24.
The deceleration in CPI was attributed to a sharp fall in prices of catering services (that account for nearly 40 percent of the CPI calculations), housing, water and electricity, fuels and building materials (more than 10 percent), and transportation (nearly 9 percent).
In addition, the negative CPI growth in Hanoi (-0.17 percent) and HCM City (-0.43 percent), the two largest economic hubs that make up nearly one third of the country’s total price index, caused the national CPI to tumble considerably.
The sharp decrease in consumer purchasing power is the result of the government’s tight monetary policy to contain inflation which has begun to bring about unwanted side-effects, said Nguyen Duc Thang, head of the GSO’s Pricing Department.
Despite the summer vacation, the economic slowdown is still forcing consumers to tighten their belts regarding nonessential expenditures, such as tourism, entertainment, and outdoor activities.
Thang forecast that the CPI in July would continue on downward trend, given the low prices of commodities and ongoing economic difficulties.
However, if the monetary policy is loosened, the CPI would hover at around 7 percent by the year’s end, said Thang.