Retail sales for the month stood at 346.3 billion yuan (US$41.7 billion), an increase of only 4.3 percent compared with May 2002, the lowest growth in five years, the bureau said.

Previous growth rates were 7.7 percent in April, 9.3 percent in March and 9.2 percent for the first three months of 2003.

The disease had more negative impact on urban markets than rural markets, the bureau said.

Retail sales in urban areas grew a year-on-year 4.9 percent in May, down 5.9 percent from April, while those in rural areas rose a year-on-year 3.2 percent, down 3.6 percent.

The catering industry was hit hard by the disease, the bureau said.

Its retail sales stood at 35.9 billion yuan (US$4.3 billion) in May, a drop of 15.5 percent from a year ago.

But there was some good news for the economy, with growth in sales of cars and telecommunication equipment, for example, the bureau said.

Sales of cars and telecommunication equipment rose a year-on-year 61.6 percent and 63.3 percent respectively.

Qi Jingmei, a senior economist with the State Information Center, said the disease had strong negative impacts on industries such as tourism, catering and transportation.

The central government cancelled the week-long May Day holiday to prevent the spread of SARS (severe acute respiratory syndrome).

In past years, May Day holiday spending contributed greatly to total retail sales, Qi said.

"The country's retail sales are likely to drop by 2 percentage points this year," she said.

Qi earlier predicted China's retail sales would grow 10.2 percent in 2003.

But Zhang Liqun, a senior research fellow with the Development Research Center under the State Council, said there would only be a small impact from SARS.

"The SARS outbreak is a short term problem," he said.

As the disease comes under control, people will buy more goods to "make up" the reduced spending, he said.

A national survey of 100 retail businesses conducted by the China General Chamber of Commerce and the All-China Commercial Information Center suggests that retail sales in China for the last two weeks of May grew by 3.98 percent year-on-year, the first increase since the outbreak of SARS.

As SARS wanes, domestic consumption is growing, the survey found.

Stores have adopted new strategies to attract buyers, including offering clients the opportunity to place orders over the phone and the Internet, according to the survey.

Healthcare goods and seasonal commodities topped the list of purchases.

The spread of SARS increased public awareness of health issues, leading to increased sales of household disinfectants and bodybuilding and fitness equipment, according to the survey.

(China Daily June 17, 2003)