• Fri
  • Dec 19, 2014
  • Updated: 3:13pm

Mainland retail sales rise 18.8pc to record high

PUBLISHED : Thursday, 13 December, 2007, 12:00am
UPDATED : Thursday, 13 December, 2007, 12:00am
 

Growing consumer spending stokes worries about runaway inflation

Retail sales on the mainland surged 18.8 per cent year on year to a record last month, underscoring rising domestic consumer spending and accelerating inflation.

With Beijing encouraging people to spend more in shops and relying less on investment and exports, retail sales have performed strongly since 2004. But the spectre of runaway inflation is worrying policymakers.

Last month's retail sales figures, the biggest since the authorities started gathering data in 1999, partly reflected the impact of higher food prices, said Wang Qian, Greater China economist at JP Morgan. Retail sales rose 18.1 per cent in October.

Food prices have increased significantly recently, with the country's inflation rate jumping to an 11-year high of 6.9 per cent last month.

Spending on grains and edible oils rose 48 per cent last month from a year ago, meat 45.3 per cent and eggs 29 per cent, according to the National Bureau of Statistics.

Total retail sales of consumer goods reached 810.5 billion yuan last month, up from 682.17 billion yuan in November last year.

'The strengthening trend in domestic consumption is well supported by household disposable incomes,' Ms Wang said. 'The focus on stimulating domestic demand should provide firm support to further unleash consumption.'

She said rising retail sales last month were stronger than JP Morgan's growth forecast of 18.2 per cent.

Huang Shaoming, a senior economist at BOC (Hong Kong), attributed robust retail sales growth in the past two months partly to rising inflation and better salaries. He said average salary income had jumped as much as 15 per cent in the past two years.

'Consumers are certainly willing to spend more when they receive better salaries,' he said. 'It is a positive sign for the economy.' China Resources Enterprise, owner of supermarket chains and seller of apparel, livestock and frozen food, is a beneficiary of the robust retail market.

Last month, the company reported better than expected underlying profit for the first nine months of the year on bigger mainland appetite for pork, beer, grocery and stockings.

Sophie Fan Shuofen, an assistant manager at Capital Securities, expects retail sales growth to continue on the back of the strong economy.

'Consumer spending will reach a peak as the Lunar New Year in early February approaches,' Ms Fan said.

From January to last month, retail sales rose 16.4 per cent to 8,019.5 billion yuan.

Consumer goods sales in urban areas grew 19.2 per cent year on year to 542.6 billion yuan. Retails sales at and below the county level were 267.9 billion yuan.

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