(Adds money supply and increases in export tax rebates)
By Zhou Xin and Langi Chiang
BEIJING, Nov 12 (Reuters) - China's sales of retail goods from furniture to cosmetics deteriorated in October, providing evidence of spending cutbacks by Chinese consumers that could deepen worries about the global economic slowdown.
China's annual retail sales growth held up well, slowing to 22.0 percent in October from 23.2 percent in September, but big declines in a breakdown by category underscored doubts about the reliability of the headline number.
A retrenchment in Chinese consumption would mark a sudden, unwelcome reversal of a long-established trend of robust spending that had been supported by higher incomes and government policies to tilt growth away from investment and exports.
"Retail sales have been hit by the slowing economy and especially by falling asset prices," said Li Lihong, senior analyst at CITIC-Kington Securities in Hangzhou. "That situation will last for some time."
The bottom fell out from virtually every category of sales.
Spending on recreational goods in October was up 2.1 percent from a year earlier, compared with an 18.0 percent rise in the first three quarters. Sales of home appliances in October increased just 0.8 percent from a year earlier, down from a 19.6 percent annual rise in the first three quarters.
For a table of the breakdown, click on [ID:nBJB000520]
"Anecdotally, it's clear that consumption growth slowed in September and October," said Stephen Green, head of China research at Standard Chartered Bank in Shanghai. "Pretty much all our customers are telling us that."
MISLEADING
The country's headline figure for retail sales actually increased in real terms from record highs earlier in the year thanks to fast-dropping consumer price inflation.
But economists have always viewed the retail index with a large measure of scepticism, in part because it includes corporate and government purchases.
"These data are misleading. Real private consumption has already decelerated," Xing Ziqiang, an economist at China International Capital Corp in Beijing, said in a note.
"Household consumption growth will continue to moderate due to slowing income growth and negative wealth effects amid the correction of the stock and property markets."
China's stock market is down about 70 percent from its peak late last year. The country's once-roaring housing market has also faltered this year, with prices in some major cities, such as Shenzhen, dropping steeply.
Not all economists read the retail sales figures in a bearish light. Ting Lu with Merrill Lynch in Hong Kong said he expected headwinds to strengthen, but for now consumption was strong.
"Rising household income, falling inflation, supportive government policies, weak wealth effects all help sustain a high growth of retail sales," he said in a note to clients.
However, money and credit data for October also pointed to weakness.
SHIFTING MIX
Growth in the broad M2 measure of money supply slowed to 15.0 percent in the year to October from 15.3 percent in September, while growth in new local-currency lending marked time at 14.6 percent despite a relaxation of loan quotas and three cuts in interest rates since mid-September.
"The figures truly reflect that banks are becoming reluctant to extend loans. It may also be because some companies are cutting their investments, so they do not want more credit," said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.
To boost the country's flagging export sector, the government on Wednesday announced an increase in tax rebates on 3,770 types of goods, or 27.9 percent of the country's tariff lines. It was the second such increase in a month.
Beijing also said it was scrapping export taxes on grains and some steel and chemical products. The government said it wanted to lend a particular hand to help labour-intensive smaller firms, which are the main generator of employment in China.
The urgent help for exports marks a partial reversal of official policy to try to wean the economy off exports and related investments and towards consumption.
Chinese officials have declared that boosting household spending is a priority and made that pledge a centrepiece of a big stimulus plan, with a headline price tag of 4 trillion yuan ($586 billion) through 2010, that was announced on Sunday.
Analysts, though, are concerned that the package will focus excessively on capital spending and not enough on boosting incomes and spending.
Household consumption for the last five years has been below 40 percent of GDP and fell last year to little more than 35.3 percent, a record low for a major economy.
Economists would like to see more spending on education and health, two areas where ordinary Chinese have to spend heavily, reducing their discretionary purchasing power. (Reporting by Zhou Xin, Shao Xiaoyi, Michael Wei and Alan Wheatley; Writing by Simon Rabinovitch, Editing by Jacqueline Wong)