Retail sales boom stays firmly in the fast lane

By Wang Yanlin  |   2008-6-14  |     NEWSPAPER EDITION

CHINA'S retail sales expanded 21.6 percent in May to 870.4 billion yuan (US$126.1 billion), the National Bureau of Statistics said yesterday.

The growth was close to the 22-percent increase in April and stayed in the fast-expansion section, analysts said. The small dip came out of a shorter Labor Day holiday, a weakened desire for spending after the May 12 earthquake and further corrections in the stock market.

"Domestic consumption has become the biggest driver of China's economy since last year. From January to May this year, retail sales kept a robust and stable expansion with a growth of around 20 percent. It is a good sign for China to reduce its reliance on export and investment," said Li Maoyu, an analyst with the Changjiang Securities Co.

"The small withdrawal last month may be a side effect of the earthquake, which to some extent curbed people's demand on non-necessity goods. A shortened Labor Day holiday from seven days to three days, as well as the bad performance of the two mainland bourses, also contributed."

This year, the "golden week" holiday in May was cut to three days. And after the devastating earthquake in Sichuan Province on May 12, China had a three-day mourning period, which forbad all entertainment and thus reduced consumption.

Meanwhile, the key index of Shanghai's stocks has dropped by more than 50 percent since the peak in October last year while shares traded in the smaller Shenzhen bourse also posted huge losses. This put a dampener on people's growing appetite for consumption.

Not changed

But the trend for the rapid expansion of consumption has not changed as the growth momentum stayed the course and was the strongest since 2001 when the data was made available on the bureau's Website.

In May, retail sales in cities jumped 22.3 percent to 594.7 billion yuan while an increase of 20.1 percent was tracked in rural areas with a sales of 275.7 billion yuan.

Wang Qing, an analyst with Morgan Stanley Research, said high consumer prices were also part of the reason for the sales expansion.

In May, the Consumer Price Index, the main gauge of inflation, jumped 7.7 percent from a year earlier. It eased from the 8.5-percent hike in April.

Among the subcategories of retail consumption, sales of meat, poultry and eggs rose as much as 25.4 percent in May, compared with 30.8 percent a month earlier.