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China's retail sales growth slows as SARS takes its toll

China's retail sales grew at their slowest pace on record last month because consumers in cities such as Beijing and Guangzhou stayed at home to avoid catching the SARS virus, causing a one-sixth drop in restaurant sales.

Retail sales rose 4.3 percent from a year earlier to 346 billion yuan (US$42 billion), the National Bureau of Statistics said in a statement released in Beijing. That's the slowest growth since 1998, when the bureau first used the current method of calculation, and less than the 5 percent median gain forecast in a Bloomberg News survey of seven economists.

The SARS epidemic peaked around the end of April, when more than 400 people in Asia were reported to have been infected with the disease in a single day. Since then the number of new infections has dwindled, averaging less than 10 a day in the past week.

"Our sales fell by about two-thirds in May from a year ago to as little as 60,000 yuan," said Zhang Liqun, manager of the Li Qun Beijing Duck Restaurant, a popular haunt of both tourists and locals.

"Customers began coming back in the middle of last month because they no longer felt it was dangerous to eat out as the number of new SARS cases fell, Zhang said.

In Beijing, retail sales dropped by a 10th last month after authorities shut movie theaters, Internet cafes and banned mass gatherings to prevent the spread of SARS.

Some other businesses, including restaurants, barber shops and travel agencies, closed in late April for an extended Labor Day holiday, which ran from May 1 to May 5.

"The impact of SARS on domestic consumption activity came from the government measures to control the disease as much as were related to the disease itself," said Michael Kurtz, economist at Bear Stearns Asia in Hong Kong.

"May will prove to be the worst month," he said.

In Hong Kong, the second-most-infected city after Beijing, retail sales last month posted their biggest drop in more than four years.

Restaurant receipts in the former British colony fell two-fifths after sliding 80 percent in April, according to the Hong Kong Restaurant and Eating House Merchants General Association.

For China as a whole, restaurant takings dropped 16 percent to 35.9 billion yuan last month after rising 2.1 percent in April, the statistics bureau said.

Sales of Chinese and Western medicine rose 16 percent, slower than 21.1 percent the month before, while cleaning supplies sales rose 37 percent, compared with 35 percent in April. Sales of cars and telecommunications rose 62 percent and 63 percent respectively.
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