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Kantar report notes purchasing decline

Released at: 10:16, 19/11/2014

Kantar report notes purchasing decline

Vietnamese consumers have continued to tighten their spending on FMCG.

by Do Huong

Fifty-one per cent urban consumers said they anticipate their financial situation will improve over the next 12 months, with only 3 per cent thinking it will get worse, a Kantar Worldpanel report reveals.

After half a year of stabilizing at 8.1 points, Purchasing Konfidence is now returning to the level in the same period last year, of 7.4 points, indicating declining confidence among urban consumers in the four key cities of Hanoi, Ho Chi Minh City, Da Nang and Can Tho. The fall was driven by lower income groups with monthly per capita income below VND3 million ($139).

Source: Kantar Worldpanel, Households Panel, Urban 4 Key Cities, Q3 2014

Purchasing Konfidence is an indicator designed by Kantar Worldpanel to measure consumer confidence regarding their purchasing, with three components: Purchasing Capability, Willingness to Buy, and Real Purchase. Although Purchasing Capability and Willingness to Buy improved during the last quarter, the Real Purchase sub-index faces a decline as consumers are tightening their spending on Fast Moving Consumer Goods (FMCG). 

When asked about their current situation, only 15 per cent believe they have no financial concerns while 22 per cent admit they are facing some constraints. As optimistic as they may claim to be, Vietnamese consumers remain practical when it comes to Real Purchase. When shoppers face pressure to cover basic needs with a constrained budget, this optimistic sentiment does not help to kick-start a recovery in consumption. In the last quarter report, 47 per cent of urban families made significant cuts to their FMCG spend.

Source: Kantar Worldpanel, Households Panel, Urban 4 Key Cities, Q3 2014

GDP growth accelerated in the third quarter to 6.2 per cent 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, inventory levels are high, the economy’s capacity to absorb investment is still low, and domestic demand remains weak.

Overall, although there are some improvements regarding shoppers’ perceptions towards the macro outlook as well as their financial condition and their willingness to spend, Purchasing Konfidence reports a slight fall in the third quarter due to tightening budgets on FMCG. More signs of the economy warming up are needed as a catalyst to stimulate consumer demand in the coming months. However, even if these signs come soon, it may take some time before macro improvements can translate into positive action from consumers.

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