China's surprise devaluation of the yuan caused Vietnamese consumer confidence to plummet in August.

According to a report released by ANZ Bank on August 26, the Vietnam Consumer Confidence Index (CCI) compiled by ANZ-Roy Morgan fell 4.9 points to 133.7 points in August, marking the second consecutive month of decline. This figure is also 1.8 points lower than the same period last year when the CCI index reached 135.5 points.

The ANZ report also found that consumer confidence fell across all categories in the survey.

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In terms of personal finances, 31% (down 3% from July) of consumers surveyed said their family finances are “better” now than they were last year, the lowest for this indicator since November 2014. Conversely, 22% (up 1%) said their family finances are “worse.”

However, 58% (down 5%) of consumers expect their family finances to be “better off” this time next year, while 6% (up 1%) expect things to be “worse off.”

In addition, 46% (down 4%) of respondents said Vietnam’s financial situation would be “good” in the next 12 months, the lowest level on record for this indicator. Meanwhile, 12% (down 1%) predicted Vietnam’s financial situation would be “bad”.

Looking at the long term, 55% (down 9%) of consumers expect Vietnam’s financial situation to be in “good shape” over the next five years – the lowest for this indicator since May 2014), while 7% (unchanged) expect Vietnam’s economy to be in “bad shape”.

Finally, 40% (unchanged) of consumers said “now is a good time” to buy major household items, while 14% (up 2%) of Vietnamese consumers said “now is a bad time.”

The August CCI decline was so unexpected that ANZ economist Glenn Maguire said that while there were economic implications for the decline, “it is not possible to explain the sharp decline”.

CCI index fell sharply beyond expectations

Glenn Maguire - ANZ Chief Economist for South Asia, Southeast Asia and the Pacific - commented that Vietnam is in an excellent state of stability when coping with the trade recession in the region, and is the only economy in Asia with positive growth in import and export.

“This is where consumer confidence – and certainly pride – is at its peak. Instead, consumer confidence fell sharply in August. From an economic perspective, we can see the implications of the decline, but we can’t explain the magnitude of the decline,” said Glenn Maguire.

According to this expert, in the past month, Vietnamese policymakers have resorted to policy measures such as widening the exchange rate band and finally devaluing the Dong for the third time. The surprise devaluation of the Chinese Yuan in early August may have raised concerns about Vietnam's declining competitiveness.

According to Glenn Maguire, the decline in confidence about the economic outlook for the next 12 months and the next five years suggests that Vietnamese households may have interpreted the cautious moves by policymakers as a sign of weakness.

However, ANZ's chief economist also said that while the dong's depreciation in the late 2000s reflected a weakening economy and other domestic issues, the 2015 devaluation was aimed at ensuring that a strong economy would not have its trade competitiveness weakened by exchange rate mismatches.

The fact that domestic gold prices remain low shows that the decline in confidence has not prompted consumers to seek another safe haven from one of the most popular savings investment channels in Vietnam, Glenn Maguire commented.

“With the Vietnamese economy still solid and stable, we note that while Vietnamese households are typically sensitive to economic news, we also expect consumer confidence to eventually stabilise, in line with a resilient economy,” ANZ chief economist stressed./.

According to VOV