China Economy - Retail sales in May Consumption remains steady

In May, China's retail sales of consumer goods grew 21.6% yoy. In nominal terms and the pace was 0.4 pct points slower than April, reversing the accelerating trend that started from 2H07 largely due to retreat of CPI.
 In real terms, the growth rate in May is 14.1% yoy, edging up 0.1 pct points from April, representing a monthly high second only to Dec. 07 in recent years (sales in Jan. and Feb. are averaged). Retail sales growth in real terms from Jan. to May present a mild upturn.
 We expect the y-o-y growth of retail sales in June in nominal terms to keep at around 21% and the real rate to be around 14% or higher. From a longer-term perspective, possible retreat of CPI may slow down the nominal y-o-y growth slightly but the real growth rate may stabilize or pick up. We expect the real growth rate of retail sales in 2008 as a whole to pick up 1 pct point from 2007, which will partly cushion the impact of slowdown in external demand.