Chinese retail sales rose 3.7 percent on the year in July, slowing from growth of 4.8 percent in June and well below the consensus forecast of 4.6 percent. In month-over-month terms, retail sales fell 0.14 percent in July after dropping 0.16 percent in June. In the statement accompanying today's data, officials noted the need to unlock the potential of domestic demand.

More broadly, officials characterised activity data published today as showing the economy"maintained a steady development momentum" despite"the complex and volatile external environment and adverse impacts from extreme domestic weather. Officials reiterated their commitment to"more proactive and effective macro policies" but provided no specific guidance about whether additional changes to policy settings will be considered in the near-term.

The consensus sees sales growth from a year ago at 4.6 percent in July versus 4.8 percent in June.

Retail Sales measure goods that are sold to the consumer or end-user, generally in small quantities and in the state in which they were purchased by the retailer. China's retail sales are reported monthly. The critical value is the change from the same month in the previous year.

Retail sales tend to have a muted impact because the Chinese economy is not heavily reliant on consumer spending. However, the government is trying to stimulate consumer spending to give the economy more balance. To this end, the government put into place a basket of stimulus measures, including government subsidies and tax breaks for home appliances and cars, to expand consumption to sustain the economic growth, which was slowed by a slump in exports amid the global economic downturn.