The value of retail sales rose by a stronger than expected 7.3 per cent in February but economists warned the figures were distorted by seasonal variations and consumer sentiment remained depressed. February's rise, 9.4 per cent in volume terms, far exceeded economists' expectations of a 3.2 per cent value and 3.6 per cent volume increase. However, they cautioned the figures were bolstered by an unusual surge of mainland visitors and Lunar New Year spending, and were unlikely to reflect improving consumer sentiment. February's rebound - the first rise in value for eight months - followed a plunge in January of 11.8 per cent in value terms and 10.4 per cent by volume. The value of January sales was HK$15.9 billion, compared to HK$14.5 billion in February. The Lunar New Year holiday fell in January last year, but February this year, distorting the base of comparison. Sales for the first two months of the year combined declined 3.6 per cent by value and 1.9 per cent by volume from the same period last year, the Census and Statistic Department said. A government spokesman said the volume of retail sales was still on a decline, which suggested continuing subdued consumer spending. Deutsche Bank said it had anticipated the higher level of positive sales figures in February because it had taken into account the 70 per cent increase in mainland visitors that month, following the end of visitor quotas. Even though visitors from other countries had declined, overall visitors to Hong Kong still increased 15 per cent in February. The investment bank estimated 6 per cent of the increase in February sales volume could be attributed to the Lunar New Year effect. 'I think the market will also react positively to this, and that will in turn boost consumer confidence,' Deutsche Bank senior economist Jun Ma said. 'The market has been waiting for stuff like this, we haven't seen anything like this for a while.' Last month's retail sales growth data is likely to decline again to zero or just above. 'At some point in the next few months [sales] should emerge above the horizon,' Mr Ma said. January is likely to mark the low point in terms of the year-on-year decline, which was the worst result since the department began to release monthly retail sales figures in October 1999. In the full year of 1998, however, retail sales plunged 16.7 per cent by value and volume. HSBC chief economist for Greater China George Leung Siu-kay agreed the February retail figures were better than expected and that they did not reflect an increase in local consumption. Mr Leung said increased sales to tourists were indicated by rising sales of goods such as cameras - photographic equipment rose 4 per cent by volume when January and February sales were combined - and commodities in department stores, up 3 per cent by volume over the two months. 'January and February are very special months for tourist arrivals anyway, I think March figures will give us a better idea whether local spending is increasing or not,' Mr Leung said. Ian Perkin, chief economist for the Hong Kong General Chamber of Commerce, said retailers still had no pricing power while consumers remained worried about rising unemployment, falling property prices and negative equity, the lacklustre performance of the share market and continued deflation. 'The best thing we can say is that retail sales are limping along at the average monthly rate they've stayed at for the last few years post the Asian financial crisis,' Mr Perkin said. 'It's averaged about HK$15 billion a month for that whole time span, whereas it was about HK$21 billion a month up to 1997.'