Retail sales rise but hit by govt spending limits

Retail sales in China in the first quarter reached 5.55 trillion yuan ($897 billion), a year-on-year growth of 12.4 percent, but a 2.4 percentage point decline from a year ago, partly due to efforts to curb government spending.

Urban retail sales totaled 4.79 trillion yuan, up 12.2 percent year-on-year, according to the National Bureau of Statistics, while rural retail sales grew 13.9 percent to 755.7 billion yuan.

Tang Jianwei, a macro-economic analyst with the center for financial research at the Bank of Communications, said high-end consumption affected by the government anti-graft policies might reduce growth in retail sales of consumer goods this year.

The catering industry has been severely affected, recording the lowest growth in a decade.

Restaurant sales growth fell 4.8 percentage points to 589 billion yuan as a result of the government crackdown on wasting public money on luxury banquets.

The drop in sales at high-end restaurants shows the rules have been effective in curbing consumption, said Sheng Laiyun, spokesman for the National Bureau of Statistics, on Monday.

Despite the decline at luxury restaurants, spending by the public at restaurants has been growing rapidly, Sheng said, indicating a sound opportunity for the industry to update its structuring and to develop new marketing models.

China's catering industry has seen the slowest growth in 10 years, according to the China Cuisine Association. The industry's year-on-year growth of 8.4 percent in the first two months is the first single-digit growth since 2001, it said.

But Sheng said retail prices, rather than weaker growth in the catering industry, is the major factor affecting the slowdown in retail sales in the first quarter.

He said retail prices grew only 1.4 percent, down 2.1 percentage points from a year ago, with the main declines being seen in sales of automobiles, gasoline and related products.

In the first quarter, automobile sales fell by 4.6 percentage points, with gasoline and related products down 11.7 percentage points from a year ago.

But ongoing industrialization and urbanization will unleash tremendous potential for investment and consumption, according to Sheng.

He said the residential consumption structure is shifting from survival-based spending to enjoyment-based spending, with rapid growth in sectors including real estate, automobiles, education and tourism.

Zhao Ping, deputy director of the department of consumer economics at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said that due to less than expected income growth and a slow economic recovery, it would take time for consumer confidence to pick up.

The lack of clear and major policy stimulus to boost consumption is also contributing to the slow growth in retail sales, she said.

For the upcoming three quarters, the government ban on spending at high-end restaurants, and on consumption of tobacco and alcohol, will continue to affect retail sales in relevant sectors, said Tang.

He estimates that after the second quarter, the negative impact of declining growth in high-end consumption on total consumption will weaken.

But growth in retail spending in 2013 might be slightly lower than that for last year, he said.