By Nipa Piboontanasawat Dec. 12 (Bloomberg) -- China’s retail sales grew at the slowest pace in nine months as the economy and inflation cooled and the global financial crisis damped consumer confidence. Sales rose 20.8 percent in November from a year earlier to 979.1 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. Growth in automobile sales more than halved to 7.7 percent and spending on construction materials plunged after property sales and prices fell. Spending growth is slowing more sharply in cities, where a collapse in trade is causing bankruptcies and job losses, than in the countryside. “The softer retail sales growth reflects both slowing real consumer demand and a rapid deceleration in inflation,” said Yan Zheng, an economist at Barclays Capital in Singapore. “We expect private consumption growth to moderate further in the short term, due to expected slower income growth and the possibility of more job losses.” The CSI 300 Index of shares fell 2.2 percent as of 11:45 a.m. in Shanghai. Dashang Group Co., the nation’s third-largest retailer, dropped 2.4 percent. The retail numbers aren’t adjusted for inflation, which eased in November to the slowest pace in 22 months. SAIC Motor Corp., China’s biggest automaker, reported a 78 percent decline in third-quarter profit as sales growth slowed. The auto industry faces “serious problems,” Li Yizhong, the minister of industry and information, said in Beijing today. ‘Great Potential’ China needs to boost consumption as the global recession drives the world’s fastest-growing major economy into a slump. “Consumer spending may maintain stable growth, though we shouldn’t hope for rapid growth in consumption,” Liu He, a senior economic official, said at a conference in Beijing today. “China’s consumer market has great potential, especially in rural areas.” Spending on construction materials fell 32.6 percent. China’s home sales fell 20.6 percent in the first 11 months from a year earlier, the government said today. Garment, furniture and jewelry sales grew more quickly than in October. Urban spending rose 20.3 percent in November from a year earlier, down from 22.1 percent in October. Rural sales climbed 21.8 percent from 21.9 percent. Consumer Confidence A 63 percent fall in the CSI 300 Index this year has helped drive consumer confidence down to the lowest level in five and a half years, credit-card company MasterCard Inc. said on Nov. 12. 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. China’s economy expanded 9 percent in the third quarter, the slowest pace in five years. Growth will slow 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. ‘Reluctance to Consume’ 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. 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. For the first 11 months, sales rose 21.9 percent to 9.776 trillion yuan. 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

Source