China’s Retail-Sales Growth Slows as Crisis Damps Confidence

By Nipa Piboontanasawat

Dec. 12 (Bloomberg) -- China’s retail sales grew at the slowest pace in nine months as the economy slowed and the global financial crisis damped consumer confidence and spending.

Sales rose 20.8 percent in November from a year earlier to 979.08 billion yuan ($143 billion), the National Bureau of Statistics said today, after gaining 22 percent in October. That was more than the 20.5 percent median estimate of 17 economists surveyed by Bloomberg News.

China needs to boost consumption as a collapse in trade drives the world’s fastest-growing major economy into a slump. The government this week pledged tax cuts and more efforts to create jobs after last month cutting interest rates by the most in 11 years and announcing a 4 trillion yuan ($584 billion) infrastructure spending package.

“What the government needs is another package that would support disposable incomes, such as by cutting taxes or increasing government employees’ salaries,” said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong.

The retail numbers aren’t adjusted for inflation, which eased in November to the slowest pace in 22 months.

A 62 percent fall in the CSI 300 Index of stocks this year, declines in house prices and job losses have damped sentiment. Consumer confidence tumbled this quarter to the lowest level in five and a half years, credit-card company MasterCard Inc. said on Nov. 12.

Consumer Sentiment

“Consumer sentiment has worsened because of declines in asset markets and all the negative news about the economy,” said Tomo Kinoshita, an economist at Nomura Holdings Inc. in Hong Kong. “Still, the fiscal stimulus should help to sustain private consumption by increasing jobs and incomes.”

SAIC Motor Corp., China’s biggest automaker, reported a 78 percent decline in third-quarter profit as sales growth slowed. Automakers are offering discounts because of weaker demand and rising competition.

China’s economy expanded 9 percent in the third quarter, the slowest pace in five years. Growth will tumble to 6 percent for 2009, Goldman Sachs Group Inc. estimates.

Exports fell for the first time in seven years in November and imports plunged, signaling that a slowdown is deepening. Power production declined by the most in at least seven years, according to preliminary data from State Grid Corp. of China.

Boosting spending on health, education and social welfare would aid low-income earners and “reduce the reluctance to consume,” the World Bank said in a report last month, pressing for the nation to rebalance the economy from investment, exports and industry to consumption and services.

Farmers’ Incomes

China must increase farmers’ incomes and help struggling small businesses to boost consumption, the National Development and Reform Commission, the nation’s top economic planning agency, said last month.

The government is expanding subsidies for farmers’ purchases of home appliances and mobile phones, aiming to boost sales by 920 billion yuan over four years, the Ministry of Finance said Nov. 30.

In July, retail sales rose 23.3 percent from a year earlier, the biggest gain since Bloomberg data began in 1999, as incomes climbed.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net