Summary of Doctoral thesis: Development of a Consumer confidence index in Vietnam

The purpose of the thesis is to build national-level consumer confidence index for Vietnam; through questions such as what factors consumers'' beliefs measure; consumer confidence assessment component; method of calculating consumer confidence index.

INTRODUCTION

1 Rationale

A Consumer Confidence Index (CCI) is an important economic indicator

which is calculated and released by many countries in the world Katona (1951)

argues that a CCI measures consumers’ confidence in an economy Thus, a CCI

not only measures the expected size of a consumer’s future income but also the

certainty or uncertainty that is linked to those expectations A CCI, therefore,

reflects psychological aspects of consumers through their optimism and

confidence toward the economy, thus affects their consumption behavior A

CCI enables the detection of people's perception of the current and future

economic development situation

A CCI is a useful statistical indicator employed to forecast consumer's

consumption, providing information for assessing the current and future health

of an economy, detecting the turning points of an economy A CCI can be used

to improve the forecast or adjust the short-term forecast of other economic

indicators, such as GDP and Consumer Price Index (CPI), etc In an economy in

which household consumption contributes an increasing share in GDP like

Vietnam, and final consumption induces a high impact on output and value

added of the economy (Ha & Trinh, 2018), the collection and compilation of a

CCI is necessary

Approximately 62 countries all over the world have compiled this index

Some international organizations have introduced handbooks on CCI

methodology Nevertheless, each country applies a different method of

computing this index to to be adapted to its specific context (UNSD, 2014)

Different calculation methods lead to adjustment of the sample selection, survey

method and frequency, field period, and questionnaire, etc to be suitable with

each country’s setting

Currently, studies on CCI in Vietnam are scarce and reveal shortcomings

The CCI computed by these studies are not nationally representative Regarding

consumer confidence survey, such elements as reporting unit, survey method

and time reference used in questions still expose limitations that need to be

improved None of the studies has calculated the survey weight to ensure the

national representation of the compiled CCI Previous studies on the CCI for

Vietnam have not conducted reliability and validity validation of the measurement of consumer confidence to identify the items for the calculation of the CCI corresponding to the Vietnamese context This is the gap that the thesis attempts to fill in

As a result, there is a need for a comprehensive study to systematize the theory of compilation of CCI and apply it to the specific conditions of Vietnam

In addition, due to a time lag in releasing the statistical data, users's data demands have not met in a timely manner Given the importance of a CCI as indicated above, as well as its preeminent characteristics, i.e more timely calculation and release than other quantitative indicators, a CCI will promptly provide information on consumers' expectations to serve the prediction of an economy’s health in the short term

Stemming from the current situation and the research gap as mentioned

above, the thesis "Development of a Consumer Confidence Index in Vietnam"

is critical

2 Objectives and research questions

The overall objective of the thesis is to construct a nationally representative CCI for Vietnam

In order to achieve the above-mentioned research objective, the thesis tries to answer the following questions: (1) How should a CCI in Vietnam be compiled? with the focus on the questions: what factors are used to measure CCI in Vietnam? What are the components of CCI in Vietnam? What are the most appropriate items for computing a CCI in Vietnam? Which is the best method for calculating a CCI in the Vietnamese setting?; (2) What is the best survey design to construct a nationally representative CCI for Vietnam?; How should the survey sample weight be computed to ensure the sample representation?

3 Research subject and scope

Research subject and scope of the thesis is the Vietnamese consumer confidence and the procedure for development of a CCI in Vietnam Specifically, the content coverage of the thesis is identified based on research objectives and questions as mentioned above Accordingly, the thesis focuses

on presenting the theoretical foundation of consumer confidence and CCI Next,

the thesis presents the procedures of developing a CCI in Vietnam, starting by

developing a procedure for the consumer confidence survey, identifying the

factors which measures consumer confidence in Vietnam, selecting the items

for measuring a CCI corresponding to the Vietnamese context On that basis,

the thesis proposes the method of computing a CCI for Vietnam

To calculate a CCI for Vietnam, the study carried a nationally

representative consumer confidence survey in November 2017

4 Research methodology

(1) Data collection: including collection of primary and secondary data;

(2) Analysis, aggregation, processing and presenting of information and

research results; (3) Scale validation and evaluation of the relevance of the CCI

5 Contributions of the thesis

- Adjust and validate measurement of consumer confidence suitable to

the Vietnamese context;

- Propose sample selection for the consumer confidence survey in

Vietnam to compute a nationally representative CCI In addition, the thesis

develops a procedure for calculating sample weight for the consumer

confidence survey to ensure the better representation of the selected sample

- Identify the calculation method of the CCI for Vietnam The thesis goes

further to validate the national CCI, regional and urban/rural CCI via comparing

the calculated CCI with socio-economic indicators at the national, and regional

and urban/rural levels to prove that the proposed index reflects approximately

the economic picture of the whole country as well as regions and urban/rural

areas of Vietnam

6 Structure of the thesis

Apart from Introduction, Conclusion, and Appendices, the thesis consists

of 3 chapters:

Chapter 1 Theoretical foundation and literature review of a CCI

Chapter 2 Development of a procedure for consumer confidence survey

and scale for measurement of consumer confidence in Vietnam

Chapter 3 Calculation method and validation of the proposed CCI for

Vietnam

CHAPTER 1 THEORETICAL FOUNDATION AND LITERATURE REVIEW OF

CONSUMER CONFIDENCE INDEX

1.1 Theoretical foundation on consumer confidence index

1.1.1 Concepts

1.1.1.1 Concept of consumer confidence

Consumer confidence or consumer sentiment is a broad concept Although concepts of consumer confidence vary in different studies, the common about

consumer confidence drawn from them is that “consumer confidence is a

subjective measure of consumers' perceptions and expectations of the general economic conditions and their income or financial status and has relationship with their own consumption.”

1.1.1.2 Concept of consumer confidence index

A Consumer Confidence Index is a statistical indicator used to measure the consumer confidence Countries in the world have different definitions of CCI,

but the common shared by them is that “A Consumer Confidence Index is an

important statistical indicator to measure consumers' perceptions and expectations regarding the overall economy (including employment and inflation), individuals'/households' financial situation, savings and/or buying intentions (durable goods) at present and in the future”

1.1.2 Approaches related to consumer confidence

In the literature, there are two main approaches related to consumer confidence

The first approach is the classical theory of consumption behavior called life-cycle permanent income hypothesis Under this hypothesis, consumers’ expenditures depend on their permanent income and transitory changes in their income make no impact on consumption Hence, consumer confidence has no role

in predicting actual consumption

which forms the basis for the compilation of CCI to measure consumer's willingness to buy In Katona's viewpoint (Katona, 1951; 1960; 1975), consumers'

buying behavior is not only completely determined by objective conditions such as

income (ability to buy) but also depends on subjective factors such as attitudes and

mood (willingness to buy) An individual’s consumption depends on their

confidence in their future financial condition If attitudes change, consumption

will change, even when consumers’ ability to buy is unchanged Willingness to

buy is also affected by unquantifiable or non-economic factors, such as political

crises or wars Accordingly, a decline in confidence can lead to a drop in spending

in a way not predicted by economic variables Katona’s viewpoint is also shared

and agreed by Acemoglu and Scott (1994), and Eppright et al (1998)

1.1.3 Factors measuring consumer confidence

Since consumer confidence is an interaction between economic and

psychological factors (Curtin, 2000) and is an abstract concept, the theory of

behavioral economics (Katona, 1951) and empirical studies (Matsusaka &

Sbordone, 1995; Santero & Westerlund, 1996; Knack & Keefer, 1997; Utaka,

2003; Kwan & Cotsomitis, 2006; Vuchelen, 2004; Gelper và cộng sự, 2007; Van

Aarle & Kappler, 2012; Dée & Brinca, 2013; Demirel & Artan, 2017;Curtin,

2000; McIntyre, 2007) show that factors reflecting consumer confidence includes:

income, inflation, economic growth, unemployment, savings, purchase of

durables

1.1.4 Role of consumer confidence index

A CCI plays an important role in predicting periods of strong economic

volatility, helping to identify people's views on future economic development A

CCI provides important information about expectations This information is

related to the emergence of a wave of optimism or pessimism, which is a critical

factor of the business cycle, helping a CCI to forecast consumption from which

contributes to forecasting indicators such as GDP and Consumer Price Index

(CPI)

1.1.5 Theoretical foundation for compilation of consumer confidence index

1.1.5.1 Theoretical foundation of consumer confidence survey

A CCI is calculated from the results of a consumer confidence survey

Therefore, in order to have a reliable CCI, it is necessary to ensure the quality of

the consumer confidence survey In order to optimize the consumer confidence

survey, there is a need to balance the available resources (costs, manpower) and the quality of the survey Accordingly, the questionnaire of the consumer confidence survey needs to meet fundamental criteria (with special attention to the survey questions, the length of the questionnaire, the reference period used in the questions) and the survey sample (nationally representative sample survey)

1.1.5.2 Theoretical foundation of development of consumer confidence scale

To measure an abstract concept, it is necessary to develop a scale DeVellis (1991) provides guideline for developing measurement scales with eight-steps Besides, after obtaining a set of items, it is necessary to continue to conduct exploratory factor analysis (EFA) to determine factors underlying this set of items Researchers can employ confirmatory factor analysis (CFA) to reaffirm the relevance of the scale with actual data

1.1.5.3 Principles for constructing a consumer confidence index

When constructing a CCI, it is necessary to ensure the following five principles: Targetting; inheritance; feasibility; consistency and comparability

1.2 International researches on consumer confidence index

1.2.1 Consumer confidence surveys and calculation methods of consumer confidence index in the world

1.2.1.1 Characteristics of consumer confidence survey

Consumer confidence survey is a sampling one, only collecting qualitative information related to consumer perceptions of a number of such topics as the Overall economy, consumers' perception of their personal income/financial status, plan for purchases, and/or savings Therefore, to quantify consumer confidence, the questionnaire of the consumer confidence survey needs to be designed so as to measure consumers' attitudes and expectations of the above topics The questions are often in the form of qualitative, mostly closed questions, with the answers given in Likert scale, from very positive to very negative

Direct and indirect methods of data collection are applied The sample frame

of the consumer confidence survey is often determined by the method of data collection The most common sampling method is stratified random sampling Its sample size is usually smaller than the quantitative surveys The sample is

nationally representative In terms of the frequency, the consumer confidence

survey is often conducted on a monthly, quarterly or biannual basis

1.2.1.2 International experiences in consumer confidence survey and calculation

methods of consumer confidence index

Based on the differences in the use of reference periods accross countries, it

is possible to divide the countries that have conducted consumer confidence

surveys and compiled a CCI into three main groups as follows: (1) Group 1:

Countries using the harmonized European Commission questionnaire; (2) Group

2: Countries using a 12-month and longer reference period; (3) Group 3: Countries

using the six-month reference period

The group 1 uses net balance (weighted) method to calculate its CCI The

groups 2 and 3 employ three main methods to calculate their CCI including: net

balance (weighted and unweighted), diffusion and relative value

1.2.2 Guidelines of international organizations on consumer confidence survey

The European Commission and the United Nations Statistical Division

(UNSD) provide recommendations on the sample frame and sample size,

sampling selection, time of survey, measures to increase the rate of respondents;

methods to deal with non-response cases; method to calculate weights of the

survey, and method to design and use words in the questionnaire

1.3 Researches on consumer confidence index in Vietnam

Three organizations in Vietnam have conducted studies on a CCI They are:

the National Center for Socio-economic Information and Forecast - Ministry of

Planning and Investment (NCEIF), ANZ Bank, and Nielsen Literature review of

the research on CCI in Vietnam shows that although certain results have been

achieved, studies in Vietnam still reveal limitations The CCI in these studies was

calculated only for Hanoi, or for urban areas, or only represents a group of Internet

users due to unrepresentative samples Wordings and the reference periods in each

item used to calculate the CCI also need to be improved The studies have not yet

conducted scale validation to select the appropriate items for compilation of a

suitable to the Vietnamese context In terms of the consumer confidence survey,

the sample frame and the survey subject of these studies still reveal shortcomings

None of the researches on CCI in Vietnam has developed a procedure for

calculating sample weights to ensure better representation of the CCI in

accordance with international recommendations

1.4 Lessons learnt and proposed procedure for constructing a consumer confidence index in Vietnam

1.4.1 Lessons learnt from international experiences

From the experiences of conducting consumer confidence surveys and and compilation of consumer confidence index of many countries in the world as well

as based on the guidance of the European Commission and UNSD, some lessons can be drawn as follows:

• Consumer confidence survey

Survey sample: The sample frame for this survey should be taken from the household list of the population census or statistical registration The target population is total adults The sample size of this survey should not be less than 1,000 observations Regarding sampling selection, it is recommended to use stratified random sampling technique Also, it is necessary to calculate the survey sample weights after data collection

For the questionnaire, all questions from the European Union Harmonized Program should be used The reference period used in the questionnaire should be

12 months Regarding the survey method and timing: it is necessary to determine the survey method suitable with the practical conditions of each country to ensure

a high response rate The timing of the survey should be the same in all countries

• Compilation of consumer confidence index

In the world, there are currently 3 methods of calculating CCI, including: net balance (weighted and unweighted); Diffusion index and Relative value

Net balance: is the difference between positive and negative answering options for each question, measured as percentage points of total answers

Net balance (unweighted): If PP denotes the percentage of respondents having chosen the option “very positive”; P, E and M denote the percentages of respondents having chosen respectively the option positive, neutral and negative;

MM is the percentage of respondents having chosen the option “very negative” and N is the percentage of respondents without any opinion (PP+P+E+M+MM+N=100)

If a question has five different answer options, net balance (unweighted) follows the formula:

Bn = (PP + P) − (M + MM) (1)

If a question has three different answer options, net balance (unweighted) is

calculated as follows:

Bn = P − M (2)

Net balance (weighted): net balance (weighted) is only used for questions

with 5 different answer options The formula is as follows:

Bn = (PP + ½P) − (½M + MM) (3)

Net balance can vary from -100, when all respondents choose the “very

negative” option to +100, when all respondents choose the “very positive” option

When the net balance is higher than 0, the respondents are optimistic

Diffusion index: is the net balance plus 100 The formula that links the

balance to the index is as follows:

Dn = Bn + 100 (4) Diffusion index can vary from 0, when all respondents choose the “very

negative” option to + 200, when all respondents choose the “very positive” option

When the diffusion index is higher than 100, the respondents are optimistic

Relative value: is the percentage of respondents reporting a “positive” answer

divided by the percentage of respondents reporting a “positive” answer adding it to

the percentage of respondents reporting “negative” The formula is the following:

RV n = (5) Depending on the country's settings, CCI is constructed based on from 4 to

10 questions A CCI is the average of items used to calculate the present situation

index and expectations index based on the corresponding calculation methods

1.4.2 Proposed procedure for constructing a consumer confidence index in

Vietnam

The procedure of constructing a CCI in Vietnam follows five steps as

follows Step 1: Overview of theoretical foundation and empirical studies; Step 2:

Development of a procedure for consumer confidence survey; Step 3:

Development of a scale for measuring consumer confidence; Step 4: Validation of

consumer confidence scale; Step 5: Compilation of CCI and evaluation of the

relevance of the index

CHAPTER 2 DEVELOPMENT OF A PROCEDURE FOR CONSUMER CONFIDENCE SURVEY AND SCALE IN VIETNAM 2.1 Development of a procedure for consumer confidence survey in Vietnam

2.1.1 Rationale for proposal, principles, objectives and requirements for the consumer confidence survey in Vietnam

2.1.1.1 Rationale for proposing a consumer confidence survey in Vietnam

The consumer confidence survey is proposed based on the three reasons: (1) Derived from international experiences; (2) Derived from limitations of the studies

in Vietnam; (3) Based on the results of consultations with experts

2.1.1.2 Principles for organization of consumer confidence survey in Vietnam

Consumer confidence survey in Vietnam should ensure the following principles: (1) Feasibility; (2) Consistency; (3) Relevance

2.1.1.3 Objectives and requirements for the consumer confidence survey in Vietnam

Survey objectives: to collect information related to consumers’ perceptions

of their personal income, spending, purchases, and the general economic development situation, changes in prices, and the unemployment situation of the country at present as well as their future expectations or plan to calculate a CCI

requirements

2.1.2 Consumer confidence survey to collect data for compilation of the consumer confidence index in Vietnam

This is a nationally representative household sampling survey The sampling units of the survey are the actual residents in the age ranging from 16 years or older, who decides household spending Reporting units are the selected households Data collection lasted for 10 days, from 01 to 10/11/2017 Methods of data collection was direct interview The sample frame was taken from the 2014 inter-census combined with the 2017 labor force survey The sample size was allocated to ensure national representation In terms of the sample size: 1,110 adults aged 16 and older were selected The thesis used a combination of multi-stage sampling strategy with random selection (systematic and simple)

The questionnaire was sent to enumerators in the selected provinces together

with the Guidelines on how to record the questionnaire 10 days before the survey

Enumerators have deep professional knowledge, good interviewing skills,

especially extensive experience in date collection Response rate reached 100%

2.1.3 Procedure for calculation of sample weights and respondent profiles

2.1.3.1 Procedure for calculation of sample weights

The sample weights are calculated following three steps: (1) Calculating

designed weight based on the probability of selecting the sampling units of each

sample stratum; (2) Calculating the corrected weight according to the

population structure (weighting according to the proportion of the studied

population); (3) Calculate the general weight

2.1.3.2 Respondent profiles

Data collected from the fieldwork allow to calculate sample weights by

region, urban/rural and gender of the respondents

Table 2.1 Demographic profile of respondents

Before weighting After weighting Number

(Persons)

Percent

(%)

Number

(Persons)

Percent

(%)

Region

Northern Midlands and Mountains 180 16,2 139 12,5

North Central and South Central Coast 180 16,2 236 21,3

Urban/rural

Gender

Source: Authors’ calculation

2.2 Development and validation of a scale for measuring consumer confidence index in Vietnam

2.2.1 Development of consumer confidence scale

2.2.1.1 Consultation with experts for scale development

Consultation with experts aimed at: (1) helping researchers reaffirm the definition of the phenomenon; (2) evaluating the items’ clarity and conciseness; (3) pointing out ways of tapping the phenomenon that researcher have failed to include

• Consultation with experts about the consumer confidence scale

The thesis used the consumer confidence questionnaire of the European Commission as rough scale, including six dimensions: (1) Overall economy; (2) Income; (3) Employment; (4) Commodity prices; (5) Purchases; (6) Savings

• Results of in-depth interviews with experts

Findings from the in-depth interviews revealed that consumer confidence

in Vietnam should include six dimensions as the international standards They were classified in the descending order as follows: (1) Individual income; (2) Employment situation; (3) Overall economy; (4) Commodity prices; (5) Purchase/Repair/Travel; (6) Savings Most of the experts agreed that a CCI for Vietnam should comprise both present situation and expectations components Moreover, six dimensions should be used in both components Regarding reference period used in the items, most experts advised the use of last 12 month and next 12-month period as reference However, some experts also proposed to supplement a number of items with reference period of last 3 years and next 3 years for several items Therefore, such dimensions as individual income, overall economy and employment situation both had reference period

of last 12 months and next 12 months as well as last 3 years and next 3 years

2.2.1.2 Asking a group of people who were similar to actual survey respondents

Findings from the in-depth interviews were used to create a questionnaire for a pilot survey with a small sample of 143 consumers in several provinces and cities The objective of this pilot survey was to check the meaning and clarity of the questions

2.2.2 Validation of consumer confidence scale

2.2.2.1 Methods of scale validation

The thesis assessed the internal reliability of the scale by using Cronbach

alpha; Exploratory Factor Analysis (EFA) and Confirmatory Factor Analysis

(CFA) were employed to assess measurement validity

2.2.2.2 Results of validation of consumer confidence scale

All of the items belonging to six dimensions, including individual

income, employment situation, overall economy, commodity prices,

purchase/repair/travel, and savings identified from the in-depth interview with

experts were used in the scale validation of consumer confidence to identify the

most suitable items to construct CCI for Vietnam As shown in Table 2.2, the

initial scale that measured consumer confidence in Vietnam comprised six

dimensions with 25 items totally

Table 2.2 Measurement of consumer confidence

Individual

income

Overall

economy

months Employment

situation

GC2 Expected evolution of commodity prices over next 12 months

GC3 Expected gas price over next 12 months

GC4 Expected electricity price over next 12 months

Purchase, repair, travel

MS1 Appropriate moment to make major purchases at present MS2 Plan for major purchases over next 12 months

MS3 Plan for travelling over next 12 months MS4 Plan for purchase or building of house over next 12 months MS5 Plan for home improvements or renovations over next 12 months

Source: Authors’ suggestion

• Reliability assessment

The thesis applied Cronbach alpha method for preliminary reliability assessment of items The results showed that Cronbach alphas of dimensions (except the dimension “Savings”) were good, ranging from 0.68 to 0.93 Specifically, Cronbach alpha of “Individual income” was 0.86, “Overall economy” was 0.85, “Employment opportunity” was 0.93, “Prices” was 0.72, and Purchase/Repair/Travel was 0,68 In the dimension “Savings”, item TK1

"Saving interest rates over next 12 months" and TK2 “Opportunity to save at present” were dropped one by one due to low corrected item-total correlation (< 0.3) and higher Cronbach alpha if item deleted than Cronbach alpha of the dimension Hence, 23 items of 6 dimensions remained

• Validity assessment

- Results of EFA

23 items remaining after reliability assessment were subjected to EFA A six-factor solution emerged at first Items TK3 and TK4 of the dimension

“Savings”, items GC3 and GC4 of the dimension “Prices”, and items MS1, MS2 and MS3 of the dimension “Purchase/Repair/Travel" were dropped due to low factor loading and/or cross-loading Therefore, 16 items remained and 5 factors emerged, the five-factor solution explained 66.6% of the total variance

16 items of the 5 factors had factor loadings greater than the threshold of 0.7 (except TN4 had factor loading of 0.64), showing that items were really

important in factors and items had high reliability In addition, Cronbach alpha

of each factor was satisfactory (> 0.7 and < 0.95), which allowed to conclude

that the scale was appropriate for measuring consumer confidence index in

Vietnam These factors were named as follows: Factor 1: Employment; Factor

2: Individual income; Factor 3: Overall economy; Factor 4: Prices; Factor 5:

Purchase

In addition, the thesis conducted EFA with these 16 items for each region

to check validity reliability at the regional level The EFA results showed that

when disaggregating to the regional level, almost all of the items had high

factor loadings (> 0.5), except for Region 2 with two items KT1 and KT3 of

lower than 0.5 factor loadings, and there was no cross-loading This shows that

the factors are different even at the regional level This helps confirm the data

set conducted from the consumer confidence survey and the consumer

confidence scale are reliable

- Results of CFA

16 items of 5 factors extracted from EFA were subjected to CFA to check

the consistency from EFA The fit indices in the initial results of CFA were not

met Specifically: CMIN/DF = 12.596 > 5; GFI = 0.880, TLI = 0.867, IFI =

0.896, and CFI = 0.895 which are all < 0.9; AGFI = 0.826 > 0,8 and RMSEA =

0.102 > 0.08 After linking residuals of items in each factor, the results of CFA

exhibited an acceptable level of fit for the measurement models as presented in

Table 2.3

Table 2.3 Results of level of fit for measurement model

Source: Authors’ calculation

Composite reliability (CR) of all factors was greater than 0.7 (Roussel et

al., 2002), indicating that the scale reliability was ensured Average Variance

Extracted (AVE) of all factors was greater than 0.5 and standardized factor

loadings of all items were greater than 0.7 and statistical significant, meaning

that convergent validity of the scale was good (Fornell & Larcker, 1981)

In addition, the results showed that all values of MSV were smaller than those of AVE, and values of square root of AVE in the diagonal were greater than factor’s correlation coefficients Therefore, the divergent validity of the scale was reached Two factors "Prices" and "Purchase" showed their uni-dimension The results are presented in Figure 2.1 below

Figure 2.1 Results of the second CFA for consumer confidence scale

Source: Authors’ calculation

2.2.3 Assessment of the results of scale validation

The results of the scale validation showed that scale of consumer confidence in Vietnam consisted of 5 factors, including: (i) Individual income; (ii) Overall economy; (iii) Employment; (iv) Prices; and (v) Purchase Compared to international standards and the initial 6 factors

identified from the in-depth review, factor "Savings" was inappropriate for

the Vietnamese context Moreover, in comparison with the previous studies

on CCI in Vietnam, i.e studies conducted by NCEIF, ANZ Bank and

Nielsen, the results of scale validity in this study showed that one new

factor, which was "prices", was found For "Purchase" factor, when using

the data set collected from the author’s consumer confidence survey, two

items of the factor "Purchase" were related to house

purchase/building/improvements/renovations, which were different from

those related to the assessment of the moment to buy durable goods used by

other Vietnamese research organizations (ANZ and Nielsen)

CHAPTER 3:

CALCULATION METHOD AND VALIDATION OF THE PROPOSED CONSUMER CONFIDENCE INDEX FOR VIETNAM 3.1 Calculation method of consumer confidence index in Vietnam

3.1.1 Proposed options for calculation of consumer confidence index in Vietnam

The results of scale validation show that consumer confidence in Vietnam

is measured by five dimensions with 16 items There are many options of combining 16 validated items to calculate a CCI for Vietnam When proposing the options for computing a CCI, the thesis will separate items of a 3-year reference period from items with the same content but of a 12-month reference period for such factors as Individual income, Overall economy, and Employment The thesis then combines these items with those of other factors which have 12-month reference period, such as Prices and Purchase into the same calculation option For the factor “Purchase”, only one of the two items of this factor is used in the calculation of CCI for Vietnam with the argument that

if a person has chosen to buy or build a house, there is very little possibility he

or she repairs/renovates a house and vice versa since houses are valuable assets With the combination as explained above, the thesis proposes 8 options for calculating a CCI for Vietnam

3.1.2 Computation of a consumer confidence index in Vietnam

The thesis applies all three calculation methods which are currently used

to compute a CCI, including: net balance (weighted and unweighted), diffusion,

and relative value to apply in Vietnam The thesis compiled overall CCI,

options

3.1.3 Comments on methods used to calculate a consumer confidence index for Vietnam based on different options

For all 8 proposed options for calculating a CCI, some conclusions can be

drawn: Firstly, the results show that, after using sample weight, the overall

CCIs calculated based on the three calculation methods are lower than before This indicates that there are differences of CCIs before and after employing

sample weight Secondly, similarities of all three calculation methods can be

found All methods of calculating CCIs reflect consumers' optimism Thirdly,

there is a difference between CCIs calculated from items of 12-month reference

period compared to those calculated from items of 3-year reference period

Fourthly, there are differences of CCIs according to calculation methods

Fifthly, CCIs calculated based on weighted net balance are always different

from those of other calculation methods

3.1.4 Proposed methods for calculating a consumer confidence index for

Vietnam

Among the 8 calculation options, the thesis proposed to choose the

unweighted net balance calculation method which combined 8 items of 4

factors, i.e Individual income, Overall economy, Employment and Prices with

reference periods of the last 12 months and the next 12 months, in which 4

items belong to the present situation index and 4 items belong to the

expectations index The thesis made such a choice for the following reasons:

Firstly, all of the items used to calculate a CCI should have the reference

period of the last 12 months and the next 12 months 12 to ensure the stability of

respondents' answers, eliminate the seasonal factor, as well as ensure the

international comparability the calculated CCI

Secondly, the literature review indicated that although two items of the

factor “Purchase” proved their relevance to the Vietnamese setting, they were

not used to calculate CCIs in other countries This is because these two items

were used to monitor the purchase/repair/renovation of houses in other

countries For a developing nation like Vietnam, care should taken in using

these two items in calculating a CCI as houses are valuable assets and thus not

everyone can buy, repair, or renovate them If these two items are used to

compute a CCI, the results can be biased

CCI for its predominance over other calculation methods Firstly, more than

half of the countries in the world are using this method Secondly, the formula

for calculating a CCI based on weighted net balance shows that a CCI is very

sensitive to the extreme answers In the current Vietnamese setting, when the

respondents' educational level is still far behind that of developed countries, the use of weighted net balance is not suitable Thirdly, the unweighted calculation method is, in nature, similar to the diffusion index method which is being used

by other countries in Southeast Asia The use of unweighted net balance helps ensure international comparability of the proposed CCI with Southeast Asian countries

3.2 Analysis and validation of the proposed consumer confidence index in Vietnam

3.2.1 Analysis and validation methods

For national CCI: the thesis compares the overall index, the present situation index and the expectations index with the economic picture presented through such socio-economic indicators as GDP growth rate, CPI, and unemployment rate of working-age laborers to see if the CCI reflects correctly the actual national economic status

In order to analyze and assess the relevance of regional and urban/rural CCIs, the thesis examines the differences of CCIs according to different sub-groups After that, the thesis compares CCIs with socio-economic indicators in the respective sub-groups

3.2.2 Validation of the proposed consumer confidence index for Vietnam

3.2.2.1 Validation of the national consumer confidence index

The overall CCI, present situation index, and expectations index were 18.8%; 17.8% and 19.7%, respectively All reflect consumers' optimism

If comparing the present situation index and expectations index compiled from the consumer confidence survey with data on GDP growth rate, unemployment rate of the working-aged laborers, and CPI, it could be seen that indexes of the present situation index's items and expectations index's items revealed the same trend with the corresponding socio-economic data Specifically, Vietnam GDP growth rate in 2017 was 6.81%, higher than that in

2016 (6.21%) This coincided with respondents' assessment of better Vietnam's economic performance in 2017 in the present situation index Data on GDP growth rate in 2018 reached 7.08%, the highest GDP growth rate in the last 11