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Vietnam’s seven-month inflation hits 13-year low

Vietnam’s inflation rate in the first seven months of this year rose 1.62 percent, the lowest rate ever recorded in the last 13 years, according to the General Statistics Office (GSO).

Customers shop for food at a supermarket in Ho Chi Minh City.
Customers shop for food at a supermarket in Ho Chi Minh City.

Compared to the same period in 2013, the consumer price index (CPI) in the first seven months of 2014 rose 4.94 percent.

The consumer price index in July rose 0.62 percent against the previous month, given continuous low purchasing power dampened by two fuel price hikes in late June and early July.

In the basket of 11 groups of goods and services used for the CPI calculation, housing-construction materials and transportation made the biggest contributions with increases of 0.43 percent and 0.44 percent, respectively.

The fuel price increases on June 26 and July 7, which brought the local gasoline price to the highest rate ever, stands behind the rise in the price of the two groups and the inflation index in July, according to the GSO.

Considered over a longer period, the CPI rise from January to July marked some unusual signs – it was not led by the price of the food-catering group, which had always took the lead before 2014.

With a 1.82 percent hike during the period, the group handed over the leading role to the transportation group which clocked in at 3.2 percent.

Main engine for inflation rise

Many experts said the adjustment of commodity prices managed by the state, like fuel, not only affects the CPI in a single month but it will also take a toll on the prices of almost all commodities and services later on.

In the first seven months of this year, gas prices have steadily risen six times for a total increase of VND1,800 per liter. The Fuel price hike is the main factor raising the prices of the transport index by 3.2 percent after the first seven months of 2014, making it the leader of the 11 groups included in the CPI calculation.

In addition, according to the judgment of an expert from the GSO, since March this year, the trend of continuous increases in food prices has become more vivid every month.

With increasing gasoline prices, the food prices will continue to receive more motivation to go up from now to the end of the year.

Furthermore, the continuous increase of gasoline prices in recent months has cast a shadow over purchasing power, which is low nowadays.

According to the GSO, as of June 1, 2014, the inventory index of the local processing and manufacturing industries increased by 12.8 percent compared to the same period last year. The index rose 12.6 percent year on year in May this year.

The index in the same period in 2012 rose 9.7 percent year on year.