China's retail sales growth surged in August to its quickest pace in more than three years, beating forecasts, but analysts said the jump largely reflected stronger inflation, not necessarily quicker underlying growth.
Retail sales, which are tracked in nominal terms, grew 17.1% from a year earlier, compared with 16.4% in July. The uptick roughly tracked a rise in annual consumer inflation in August to 6.5%, from 5.6% in July.
"Retail sales growth is obviously strong. The problem is that the figures are being pushed up by the rising inflation as well. So actually, on a real basis, I don't think there's much of an acceleration," said Paul Cavey, an economist with Macquarie Securities in Hong Kong.
August's pace, the quickest since May 2004, beat economists' expectations of a 16.5% rise. Consumer inflation data, released on Tuesday, also surprised on the upside.
Beijing would welcome an increase in real buying activity by the country's consumers. It is trying to tilt its economy away from what economists call an unsustainable reliance on exports -- to the tune of 40% of national output.
Not only does China's gaping trade surplus -- it hit $25 billion in August -- contribute to tensions with its major trading partners, it also exposes it more to any downturn in the United States or other economies.
Cavey said that a lynchpin of Beijing's efforts to spur spending would be their effectiveness in the countryside, and that a recent epidemic among pigs was likely to blunt growth in spending there this year.
"We will expect retail sales growth to continue to be strong next year as the countryside gets over all this," he said.
In the details, the retail sales data suggested a significant impact from the recent spike in food price inflation. Sales of grain and edible oils and meat, eggs and poultry, two of the categories where price rises have been most striking, rose 44% and 45.2%, respectively.
Still, Lin Songli, senior economist at Guosen Securities in Beijing, said the figures showed that consumption was starting to take up a greater role in driving the world's fastest-growing major economy.
"Consumption growth has not reached its peak yet, and we are now expecting even higher growth rates in coming months," Lin said.