Aug. 14 (Bloomberg) -- China's retail sales grew at the fastest pace in more than three years, buoyed by a stock market rally and higher wages and prices.

Spending climbed 16.4 percent to 699.8 billion yuan ($92 billion) in July from a year earlier, the National Bureau of Statistics said today, after gaining 16 percent in June. The figures aren't inflation-adjusted.

The biggest increase in consumer prices in a decade contributed to the acceleration. Stock-market gains and a 14 percent jump in urban incomes underpinned demand, aiding Premier Wen Jiabao's efforts to boost consumer spending and reduce the economy's dependence on exports and investment.

``Inflation played an important role in gains for food sales,'' said Paul Tang, chief economist at Bank of East Asia Ltd. in Hong Kong. ``But in other categories there's genuine continued gains, and overall growth is steady.''

Some Chinese retail stocks climbed. Youngor Group Co., the country's No. 1 maker of men's clothing by sales, gained 5.9 percent to 29.81 yuan after forecasting first-half profit more than tripled.

Meat, poultry and egg sales jumped 51 percent from a year earlier, the statistics bureau said. Jewelry spending rose 46 percent, automobile sales climbed 43 percent and those of furniture gained 32 percent.

Meat, Egg Prices

Retail prices rose 2.4 percent in the first half from a year earlier, according to the statistics bureau. Inflation climbed to 5.6 percent last month on meat and egg price rises.

July's retail sales growth beat the 16.2 percent median estimate of 18 economists surveyed by Bloomberg News. The gain was the biggest since May 2004 after adjusting for distortions caused by China's Lunar New Year holidays.

``Strong household income growth is providing support for consumer spending,'' said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. ``Even with high food- price inflation, real income growth for most people is even higher.''

Wages in urban areas almost doubled in the past five years and the benchmark CSI 300 Index of stocks has climbed 132 percent in 2007.

For the first seven months, retail sales climbed 15.5 percent from a year earlier to 4.9 trillion yuan. The gain compares with a 3.1 percent increase in U.S. sales in July.

Wal-Mart, Wumart

Wumart Stores Inc., Beijing's biggest supermarket chain, this month said profit almost doubled in the second quarter from a year earlier on increased sales.

Wal-Mart Stores Inc., the world's biggest retailer, plans to more than double its stores in China in the next five years. Mothercare Plc, a U.K. retailer of maternity and children's clothes, said it will open two outlets in Shanghai and one in Beijing in 2008.

Chinese consumer confidence in the second half is likely to rise to the highest level in 4 1/2 years, according to a survey by MasterCard Inc., the U.S. credit-card company.

Disposable urban incomes jumped 14.2 percent in the first half from a year earlier and earnings among rural households climbed 13.3 percent. McDonald's Corp., the world's biggest restaurant company, last week said it plans to raise salaries in China by 12 percent.

China will reduce a tax on interest income to 5 percent from 20 percent tomorrow, increasing returns on bank deposits to counter the effects of inflation.

China's economy, the world's fourth largest, grew 11.9 percent in the second quarter from a year earlier, the fastest pace in more than 12 years. Overseas sales jumped 34.2 percent in July.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

Last Updated: August 14, 2007 01:07 EDT