Purchasing Konfidence falls in Q3
GDP growth accelerated in the third quarter to 6.2% over the same period last year, as the rise in exports helped offset weak domestic demand. However, this early sign of improvement is not strong enough to leverage the whole economy as many businesses are still facing difficulties, the inventory levels are high, the economy's capacity to absorb investment is still low and domestic demand remains weak.
After a half year stabilizing at 8.1 points, the Purchasing Konfidence is now going back to its level the same period last year, at 7.4 points, indicating a declining confidence among Urban* consumers. The fall was driven by lower income groups with monthly income per capita below 3 million VND.
Purchasing Konfidence is an indicator designed by Kantar Worldpanel to measure consumer confidence regarding their purchasing, with 3 components: Purchasing Capability, Willingness to Buy and Real Purchase. Although Purchasing Capability and Willingness to Buy are improving during the last quarter, Real Purchase sub-index faces a decline as consumer are tightening their spending on FMCG. According to our survey, 51% urban consumers state that they anticipate their financial situation will improve in the next 12 months, and only 3% think it will get worse. However, when asked about their current condition, only 15% believes they have no financial worries while another 22% admit they are facing some constraint. As optimistic as they may claim, Vietnamese consumers stay practical when it comes to real purchases. When shoppers are facing the pressure to cover basic needs with a constraint budget, this optimistic sentiment does not help much to kick-start a recovery in their consumption, even for necessities like FMCG. Our record in the last quarter report 47% of urban families have significant cut on their FMCG spend.
In overall, although there are some improvements regarding shoppers’ perception towards the macro outlook as well as their financial condition and their willingness to spend, Purchasing Konfidence reports a slight drop in Quarter 3 due to tightening budget on FMCG. More warming-up signals from the economy is a necessary catalyst to stimulate consumer demands in the coming months. However, even if these signals will come any time soon, it may take some time before macro improvements can translate into positive response from consumers in reality.
(*): Urban 4 Key cities, including HCMC, Ha Noi, Da Nang and Can Tho