Retail sales of China jumped 23.3 percent last month to 862.9 billion yuan (US$125.8 billion), the fastest pace since 1996, the National Bureau of Statistics said yesterday.
The growth outpaced the 23-percent increase in June and the 21.6-percent in May. It helped to push the figure for the first seven months to 5.97 trillion yuan, a 21.7-percent jump from the same period a year ago.
Analysts said increased spending in the run-up to the Olympics and relief efforts to aid the country's earthquake-stricken areas boosted sales at home, which compensated for weaker external demand and slower growth in investment.
"Domestic consumption has expanded steadily so far this year as people showed a greater willingness to spend," said Li Maoyu, an analyst at Changjiang Securities Co. "But the plummeting stock market may curb faster growth in the future."
China's equities markets have been in the doldrums since the start of the year. The benchmark Shanghai Composite Index dropped below 2,500 this week, more than half its October heyday when it crested above 6,000 points.
China's property market is also showing signs of a slowdown as home sales dropped in several major cities even though prices have remained little changed.
The falloff has resulted in a drop in spending on construction and home decorations, which fell 3.4 percent in July from a year earlier.
The Beijing Olympics, however, has triggered higher sales in the hospitality industry, with receipts at hotels and restaurants gaining 26.5 percent to 116.8 billion yuan.
Even with all the spending, inflation has eased. The Consumer Price Index growth slowed in July for a third straight month to 6.3 percent, the lowest level since last September.
"The slower growth in the CPI is a positive element for the expanding retail sales," Li said.
Peng Ken, a Citigroup economist, said the strength in consumer demand "is a significant stabilizing factor in the slowing economy and takes some pressure off policy makers to engineer other drivers of growth."
Among the subcategories of retail consumption, sales of meat, poultry and eggs rose 18.4 percent in July while spending on grain and edible oil increased 18.3 percent.
Petroleum and related products sales soared 55 percent, due to price rises for gasoline and diesel, which rose as much as 18 percent in June.