RETAIL sales on the mainland grew at a record rate last month, fueled by surging consumer prices and rising incomes, the National Bureau of Statistics said today.

Sales climbed 18.1 percent from a year earlier to 826.3 billion yuan (US$110.1 billion) in October, the largest single-month increase since 1999 when the government started releasing figures.

Spending in urban areas accelerated 18.6 percent to 559.8 billion yuan, a bit faster than sales in rural areas, which expanded 17.1 percent to 266.5 billion yuan.

"The figure is in line with our expectations, based on the surge in consumer prices in October,'' said Ma Jun, chief economist at Deutsche Bank Hong Kong. "But people's rising incomes also contribute to spending growth.''

The mainland's consumer price index, the main gauge of inflation, rose by 6.5 percent last month, its biggest increase in a decade, mainly due to soaring food costs.

Prices of pork soared 54.9 percent in October from a year ago while poultry prices jumped 38.3 percent. Cooking oil prices were up 34 percent.

Henry Li, an economist at Core Pacific-Yamaichi International Ltd, said rising prices accounted for about 25 percent of the increase in retail sales, according to Bloomberg News.

But rising incomes eased a bit of the pressure brought by surging consumer prices.

In the first nine months of this year, disposable income for city dwellers expanded 13.2 percent to 10,346 yuan and earnings for rural households increased 14.8 percent to 3,321 yuan, after being adjusted for inflation.

Meanwhile, the mainland created 9.2 million jobs by the end of September, meeting a goal set before the year of creating nine million new jobs for all of 2007.

The mainland has cut taxes, raised minimum wages and improved education, welfare and health care in a bid to boost consumer spending and relieve the reliance on investment and exports.

"To some extent, a strong retail sales growth marks a burgeoning domestic consumer market, soothing an economy relying too much on trade and investment,'' said Li Maoyu, an analyst with Changjiang Securities Co Ltd.

In October, China's trade surplus grew 13.5 percent to US$27.05 billion, with a slower pace in export growth.

Exports last month increased 22.3 percent from a year earlier, decreasing 0.5 percentage point compared with September.

With many expecting the yuan to appreciate further, China's money-supply growth in October also swelled in a market already rich in cash.

M2, the broadest measure of money supply, rose 18.47 percent last month from a year earlier to 39.42 trillion yuan, exceeding the central bank's annual target for a ninth straight month.

"While the government needs to tame inflation, it should continue to boost consumer spending and upgrade the industrial structure for a sustainable economic performance,'' said Li.

Through October, retail sales rose 16.1 percent to 7.209 trillion yuan.

Consumer spending on meat, poultry and eggs in October surged 45.4 percent from a year earlier, while grain and cooking oil spending swelled 45.1 percent year on year.

Automobile sales expanded 36.1 percent, while jewelry sales climbed 37.5 percent.