China April Retail Sales Rise at Fastest Pace in Year (Update1)
Bloomberg.com
May 15 (Bloomberg) — China’s retail sales rose at the fastest pace in more than a year in April as rising incomes left consumers with more money to spend on electronics, jewelry and clothing.
Sales rose 13.6 percent last month from a year earlier to 578 billion yuan ($72 billion) after climbing 13.5 percent in March, the Beijing-based National Bureau of Statistics said today. That beat the 13.4 percent median forecast of 21 economists in a Bloomberg News survey.
Surging overseas demand for Chinese-made goods is causing manufacturers to expand and hire migrant workers from China’s poorer rural areas. Increasing affluence among China’s 1.3 billion citizens is luring overseas companies such as Best Buy Co., the largest U.S. electronics retailer.
“The recent strength in export manufacturing is a big support to incomes and retail sales growth,” said Ben Simpfendorfer, an economist at Royal Bank of Scotland in Hong Kong who correctly forecast April’s increase.
April’s gain was the biggest since March 2005, adjusting for distortions caused by the weeklong Lunar New Year holiday, which fell in January this year and in February in 2005. Sales growth peaked at 17.8 percent in May 2004, then cooled as the government introduced curbs on lending and investment.
Spending on household electrical appliances rose 17.6 percent and sales of jewelry jumped 29.5 percent, the report showed. Sales of clothing, shoes and accessories increased 17.4 percent. For the first four months, retail sales gained 13 percent to 2.4 trillion yuan.
Rising Disposable Incomes
Premier Wen Jiabao has cut taxes and raised minimum wages in a bid to encourage consumer spending and make economic growth less tilted toward investment and exports. That has benefited retailers such as Gome Electrical Appliances Holdings Ltd. China’s largest home-appliance retailer this week said sales jumped 68 percent in the first quarter.
Shanghai General Motors Co., General Motors Corp.’s largest Chinese venture, on May 10 said sales surged 78 percent last month on demand for its Chevrolet Lova and Buick Excelle cars. China is the world’s third-largest vehicle market.
“The government is trying to encourage domestic consumption,” said Paul Tang, an economist at Bank of East Asia in Hong Kong. “We expect the environment to remain friendly for retail sales for the remainder of this year.”
Per capita disposable incomes in towns and cities increased 10.8 percent in the first quarter, while rural incomes jumped 11.5 percent, an April 20 report showed. The economy expanded 10.2 percent in the first quarter, more than any other major economy.
Best Buy last week agreed to invest $180 million for majority control of China’s Five Star Appliance, giving the U.S. company 136 outlets in eight provinces. Overseas retailers such as Wal- Mart Stores Inc. and Carrefour SA are also expanding their store networks in China.
Even as demand in China grows, excess supply and intensifying competition has forced some companies to cut prices, squeezing profits. Shenzhen Textile Holdings Co., Ltd. on April 25 said profit slumped 47 percent in the first quarter.
“Growing competition makes it difficult for retailers to raise prices,” said Kent Yau, an economist at Core Pacific- Yamaichi in Hong Kong, “But at same time, raw material costs are going up. Profits are being squeezed.”
