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

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

* Consumer spending shifts to leisure activities

* Luxury spenders shop overseas to avoid high taxes

(Adds official data, details and updates shares)

By Donny Kwok

HONG KONG, Oct 8 (Reuters) - China's retail sales growthslowed during the Golden Week break, but demand was better thanexpected, and authorities provided a snapshot of increasinglyimportant sources of demand in the world's second-largesteconomy.

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

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

"On the bright side, the figures suggested that consumersentiment on the mainland is still strong and people are willingto spend despite the slowing economy," said Alex Fan, head ofresearch at ICBC International.

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

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

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

The spending patterns of the country's 1.3 billion peopleare closely watched to gauge the health of China's economy as itswitches from a reliance on exports to boosting consumer demandat a time when economic growth is slowing.


Analysts said strong tourism data pointed to a shift inconsumer spending toward leisure activities, helped by Beijing'smove to waive toll fees for cars which saw millions of holidaymakers take to the roads.

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

Shares of China Travel International Investment Hong KongLtd hit a six-week high last week, although the stockfell on Monday in line with broader markets on renewed concernsover economic growth.

Airline stocks gained across the board, with China Eastern

up 1.6 percent, China Southern climbingnearly 4 percent and Air China rising 1.2 percent.

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

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

"Chinese consumers are still relatively confident aboutChina's economic fundamentals," Bank of America Merrill Lynchsaid.


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

Sales for home appliance retailers GOME ElectricalAppliances 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'ssouthern 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 whichsupported the growth," said Linus Yip, chief strategist at FirstShanghai Securities.

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

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

"Internet shopping and outbound tourism from Shanghaiappear to be the main reasons, with online prices much cheaperthan those products displayed here."($1 = 6.2849 Chinese yuan)

(Reporting by Donny Kwok and Twinne Siu in Hong Kong; LuJianxin in Shanghai; Editing by Kim Coghill)

((donny.kwok@thomsonreuters.com)(+852 2843 6470)(ReutersMessaging: donny.kwok.reuters.com@reuters.net))


Related Tags