UPDATE 1-China retail sales growth slows, but consumers still confident

Mon Oct 8, 2012 4:55am EDT

* Golden Week retail sales up 15 pct to $127 billion

* Consumer spending shifts to leisure activities

* Luxury spenders shop overseas to avoid high taxes

By Donny Kwok

HONG KONG, Oct 8 (Reuters) - China's retail sales growth slowed during the Golden Week break, but demand was better than expected, and authorities provided a snapshot of increasingly important sources of demand in the world's second-largest economy.

The Golden Week holiday at the start of October, when millions of people travel and spend more than usual, brings huge discounts and promotions as retailers battle for market share.

Overall retail sales grew 15 percent during the National Day holiday, which coincided with the Mid-Autumn Festival to provide a rare eight-day break. That compared with 17.5 percent growth last year during a seven-day holiday.

"On the bright side, the figures suggested that consumer sentiment on the mainland is still strong and people are willing to spend despite the slowing economy," said Alex Fan, head of research at ICBC International.

"Everything you do during the holidays is beneficial, like shopping, travelling, as well as food and beverages."

Revenues in the retail and catering sectors totalled 800.6 billion yuan ($127.4 billion), compared with 696.2 billion yuan a year ago, China's Ministry of Commerce said on Monday.

The market for daily necessities was stable, with prices for pork, beef and mutton down slightly, it added.

The spending patterns of the country's 1.3 billion people are closely watched to gauge the health of China's economy as it switches from a reliance on exports to boosting consumer demand at a time when economic growth is slowing.


Analysts said strong tourism data pointed to a shift in consumer spending toward leisure activities, helped by Beijing's move to waive toll fees for cars which saw millions of holiday makers take to the roads.

Revenues for food and beverage operators in cities such as Shanghai, Tianjin and Qingdao, recorded increases of between 15 and 29 percent from a year earlier, the data showed.

Shares of China Travel International Investment Hong Kong Ltd hit a six-week high last week, although the stock fell on Monday in line with broader markets on renewed concerns over economic growth.

Airline stocks gained across the board, with China Eastern up 1.6 percent, China Southern climbing nearly 4 percent and Air China rising 1.2 percent.

Tourism revenue at China's 119 major attractions rose 25 percent during the holiday, while the number of visitors increased 21 percent, a government industry regulator said. The number of railway passengers rose 9.4 percent to 60.95 million.

The data signalled tourists were favouring sightseeing over traditional locations such as luxury stores, with huge increases seen in the number of visitors to camp sites and attractions.

"Chinese consumers are still relatively confident about China's economic fundamentals," Bank of America Merrill Lynch said.


Demand for digital products, home appliances, smartphones, cameras and computers was solid, the ministry said.

Sales for home appliance retailers GOME Electrical Appliances Holding and Suning Appliance Co Ltd , seen by some as China's answers to Best Buy , increased up to three times in Dongguan, in China's southern province of Guangdong, it added.

GOME and Suning had prepared goods worth 6 billion yuan ($954.67 million) for the holiday, including mobile phones, computers, and flatscreen TVs, Chinese media said.

"It was the underlying growth momentum for basic needs which supported the growth," said Linus Yip, chief strategist at First Shanghai Securities.

Analysts said luxury spending and apparel were unlikely to have benefited much as shoppers preferred to buy high-end goods overseas to take advantage of lower taxes and weaker currencies.

"Our shop was very crowded during the same Golden Week last year but we have seen much fewer people this year," said Man Bihua, a 40-year-old saleswoman at Hola in Shanghai, which sells home and lifestyle products.

"Internet shopping and outbound tourism from Shanghai appear to be the main reasons, with online prices much cheaper than those products displayed here."

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