China's retail sales grew only 6.7 per cent in the second quarter of this year, due to the outbreak of SARS virus, the National Bureau of Statistics said Monday.

Retail sales stood at 1,044.7 billion yuan (US$125.9 billion) during the April-June period, the bureau said in a statement.

For the first half of this year, retail sales rose a year-on-year 8 per cent to 2,155.6 billion yuan (US$259.7 billion).

The SARS (severe acute respiratory syndrome) outbreak had a great impact on consumption, one of the three major driving forces of the country's economic development, said Yao Jingyuan, chief economist with the bureau.

Since mid-April, the country's consumer goods market has fluctuated greatly, Yao said.

Retail sales declined quickly and dipped to the lowest level in May.

Retail sales of the catering industry dropped a year-on-year 15.5 per cent, he said.

But in June, when the country brought SARS under control, people's desire to consume returned quickly.

Retail sales grew a year-on-year 8.3 per cent in the month.

"SARS had more of an impact on consumption behaviour than consumption capacity," Yao said.

According to the latest survey by the Beijing Municipal Statistics Bureau, the service industry in Beijing, which was hit hard by SARS, showed signs of recovery in June.

The aggregate business volume of the firms surveyed was 1.1 billion yuan (US$132 million) in June, a 19.7 per cent fall year-on-year. But the turnover was still an improvement on May's year-on-year drop of 43.2 per cent.

The survey shows that hairdressers, beauty salons, bath houses and entertainment centres all recovered quickly last month.

Beijing's tourist industry is also recovering following the lifting of restrictions on visits by Chinese travellers by some 77 countries. But it is doing so slowly, with the business volume of tourism-related carriers, including hotels, tourist agencies and scenic spots, still well below that of last year.

A survey of 15 hotels in the city's east shows the occupancy rate climbed to 19 per cent in June from 5 per cent in May.

Qi Jingmei, a senior economist with the State Information Centre, said the country's retail sales are likely to rise between 8.3 and 8.5 per cent.

She earlier predicted China's retail sales would grow 10.2 per cent in 2003.

"The SARS outbreak will have a considerable impact on people's consumption capacity, especially on farmers' consumption," she said.

In the second quarter, when the SARS epidemic was most severe, farmers' per capita income dropped by 35 yuan (US$4.20).

This would affect farmers' income growth by 1 percentage point for the whole year, according to Yao.

A survey of farmers from five provinces, including Henan, Sichuan and Hunan, suggests that by June 15, less than a quarter of farmers had returned to work in cities.

This would have further negative impacts on farmers' income growth, Yao said.

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