Why Core Inflation in Vietnam Lags Behind CPI Growth in the First Ten Months of 2025

Summary:

Core inflation in Vietnam increased by 3.20% year-on-year in the first ten months of 2025, slightly lower than the general CPI growth of 3.27%, primarily due to the exclusion of volatile items such as food, energy, education,...

Divergence Between CPI and Core Inflation Explained

Vietnam’s consumer price index (CPI) in October 2025 rose by 0.20% compared to the previous month, with cumulative growth reaching 3.27% year-on-year for the first ten months. In contrast, core inflation which excludes volatile items increased by only 3.20% during the same period. This discrepancy is subtle but significant in understanding the underlying inflation dynamics.

According to the General Statistics Office’s (GSO) monthly report released on November 6, the headline CPI increase was driven by a confluence of short-term cost surges: food prices rose in flood-affected areas, dining out became more expensive due to rising input costs, and tuition fees at non-public schools continued to climb. However, these price shifts belong to categories excluded from the core inflation calculation.

This statistical distinction creates a structural reason for the gap: although CPI includes food, energy, education, and healthcare, core inflation filters these out to better reflect long-term, policy-relevant inflation trends. As a result, temporary or seasonal shocks in these categories can inflate headline CPI while leaving core inflation relatively unaffected.

October Price Trends: Food, Education, and Jewelry Lead the Rise

Among the ten commodity groups that contributed to the 0.20% CPI increase in October, the food and catering group had the most significant impact, rising by 0.59%. Notably, food alone surged by 0.69%, contributing 0.15 percentage points to the monthly CPI. Eating out increased by 0.57%, while staple food rose only marginally by 0.02%.

The education group added further pressure, increasing by 0.51% in October. Although public institutions benefited from tuition subsidies under Decree No. 238/2025/ND-CP, private schools adjusted their fees upward. This was complemented by moderate increases in school supplies and stationery.

The miscellaneous goods and services group also recorded notable inflation at 0.43%, largely due to a 9.82% spike in jewelry prices aligned with global gold trends. Other contributors included personal care items, non-electric personal tools, and services such as hairdressing and environmental hygiene.

These increases although significant are treated as external shocks within the CPI framework and are omitted from core inflation measurements, explaining the slower growth in the latter.

Currency and Gold: External Influences Add Volatility

The domestic gold price index surged by 12.53% month-over-month in October, marking a dramatic 63.64% increase since December 2024 and a staggering 65.03% rise year-on-year. The average ten-month increase stood at 44.02%, driven by global investor demand in response to falling interest rates, a weakening USD, and escalating geopolitical risks.

In contrast, the USD price index in Vietnam fell by 0.34% in October, despite rising 3.98% on average over the first ten months. This decoupling from the global USD trend which rose by 1.02% in October reflects localized FX interventions and shifting capital flows.

These external price movements impact headline CPI through cost-push mechanisms, particularly for gold-related goods and imports, but do not affect core inflation unless they alter underlying demand or wage conditions.

Implications for Policy and Market Outlook

The gap between core inflation and headline CPI in Vietnam underscores a key point for monetary policy: while surface-level prices are influenced by short-term shocks, the underlying inflationary trend remains moderate. The difference is a consequence of methodology not necessarily a sign of policy failure and provides SBV (State Bank of Vietnam) and fiscal authorities with a clearer view of persistent demand-side pressures.

Looking ahead, if headline inflation continues to be driven by volatile categories, policymakers may prefer to respond with targeted fiscal tools rather than broad monetary tightening. The CPI-core inflation gap thus serves as a valuable diagnostic tool in balancing inflation control with economic recovery objectives.

Risk Warnings and Investment Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading with strategies. Following any strategies or investment methodologies is the potential for loss. The content on the site is being provided by our contributors and analysts for information purposes only. You alone are solely responsible for determining whether any trading assets, or securities, or strategy, or any other product is suitable for you based on your investment objectives and financial situation.

Quick Access to 7x24

Quick Access to More Editor-selected Real-time News