GDP: GDP is expected to increase by about 5.0% year-on-year in the first quarter
Externally, the momentum of the global economic recovery has recovered. Developed countries such as the United States, Europe, and the United Kingdom have maintained high interest rates, but financial conditions have eased in anticipation of interest rate cuts in the middle of the year. From January to February, mainland exports picked up, and manufacturing PMI export orders also maintained a rebound in March, and the external demand faced by the mainland economy showed signs of improvement, but geopolitical uncertainty was still high.
Internally, the economy performed better than expected in the first quarter. Consumption showed a recovery trend, residents' willingness to consume has been boosted, the consumption of various life services during the Spring Festival exceeded expectations, the production and operation of the producer service industry has been more active since March, the flight rate of subway passenger transport and domestic flights has remained at a high level, and the overall recovery momentum of residents' consumption has been consolidated. Investment in infrastructure and manufacturing remained steady, with growth rates in January and February exceeding the level of last year. Since March, with the warming climate and the concentrated start of construction after the holiday, the construction progress of construction projects in various places has accelerated, and the manufacturing PMI has reached the highest level in a year. However, the real estate market is still at the bottom, and the growth rate of development investment is still facing downward pressure.
On the whole, it is expected that the mainland's GDP is expected to achieve a year-on-year growth rate of about 5% in the first quarter, laying a good foundation for achieving the annual target.
Industry: Industrial production is expected to increase by about 7.2% year-on-year in March, up from 7.0% in January-February
The official manufacturing PMI rebounded to 50.8% in March this year, the highest level in nearly a year, and the month-on-month increase was significantly better than seasonal. Among them, the production index increased by 2.4 percentage points to 52.2%, the new orders index increased by 4.0 percentage points to 53.0%, and the new export orders increased by 5.0 percentage points to 51.3%, all of which were better than the seasonality, showing a trend of both supply and demand.
Judging from several high-frequency data on operating rates, the average operating rate of all-steel tires and semi-steel tires of automobile tires in March was higher than that of the same period last year, and the average operating rate of chemical industries such as methanol, PTA, PX and polyester filament was also higher than that of the same period last year, but the operating rate of blast furnace, rebar and petroleum asphalt plants was lower than last year, reflecting the strong production of automobile industry and chemicals, but the real estate infrastructure industry chain was relatively weak.
It is expected that the month-on-month growth rate of industrial added value will accelerate in March, and the year-on-year growth rate will rebound from 7.0% in January-February to about 7.2%.
Investment: Fixed asset investment is expected to increase by about 4.4% year-on-year in the first quarter, up from 4.2% in January-February
Infrastructure investment: It is expected to fall to about 6.0% from 6.3% in January-February. In March, with the warming climate and the concentrated start of construction after the holiday, the construction progress of construction projects in various places accelerated, and the business activity index of the construction industry recorded 56.2%, an increase of 2.7 percentage points from the previous month, which was lower than the level of the same period in history. According to the centennial construction survey, as of the third day of the second lunar month (March 12), the resumption rate of 10,094 construction sites across the country was 75.4%, and the labor rate was 72.4%, which rebounded month-on-month, but was still the lowest level in the past four years. From the perspective of leading indicators, the operating rate of petroleum asphalt plants in March increased by 3.1 percentage points from January to February, but was 6.1 percentage points lower than the average of the same period in the past five years. In March, the net financing of urban investment bonds and special bonds was 277.4 billion yuan, down from 366 billion yuan in the previous month, and the leverage on infrastructure investment weakened.
Manufacturing investment: It is expected to rebound to about 10.0% from 9.4% in January-February. Production and business activity in the March PMI was expected to be 55.6%, rebounding to the highest level of the year, and the BCI Corporate Investment Outlook Index fell slightly. Considering the slight recovery in exports, the decline in profits of manufacturing enterprises has turned positive, and the policy requires "accelerating the development of new quality productivity", it is expected that the growth rate of manufacturing investment will rebound from 9.4% in January and February to about 10%.
Real estate development investment: It is expected to narrow from -9.0% in January-February to about -8.7%. According to high-frequency data, the transaction area of commercial housing in 30 large and medium-sized cities in March was 8.75 million square meters, down 47% from the same period last year, and the land transaction area of 100 large and medium-sized cities was 72.81 million square meters, a year-on-year increase of 26.8%, turning positive year-on-year for the first time in nearly nine months. Residents' willingness to buy houses is still weak, but the confidence of real estate companies has recovered, and the income from land sales is expected to support real estate development investment, coupled with the decline in the base of the same period last year, real estate development investment is expected to narrow from -9.0% in January and February to about -8.7%.
Consumption: The growth rate of total retail sales of consumer goods is expected to fall from 5.5% to about 4.5% in March
After the Spring Festival, residents' demand for service consumption and consumer durable products fell, and the surveyed unemployment rate in urban areas across the country rebounded in January and February, affecting residents' income and consumption performance, and the consumer market showed a weak recovery momentum.
From the perspective of major commodities, the prosperity level of the catering industry has fallen, and the business activity index has fallen below the critical point; automobile sales have slowed down, and from March 1 to 24, the retail sales of passenger cars have increased by 11% year-on-year, and the growth rate has fallen by 6 percentage points from January to February.
However, with the continuous optimization and adjustment of policies at both ends of real estate supply and demand, the marginal improvement in commercial housing sales will drive the stabilization and recovery of residential-related consumption. According to the China Index Research Institute, the sales of the top 100 real estate companies in March increased by 117.3% month-on-month, with a significant month-on-month increase and a narrower year-on-year decline.
Taking into account the increase in the base of the same period last year, it is expected that the year-on-year growth rate of total retail sales of consumer goods in March will fall from 5.5% to about 4.5%.
Foreign trade: Exports are expected to fall by 4.2% year-on-year in March, while imports will rise by 1.2% year-on-year, achieving a trade surplus of US$82.8 billion.
In terms of freight rates, the BDI index rose 34.8% month-on-month in March, and the mainland export container freight index fell by 10.6% month-on-month due to the high base, but increased by 26.1% year-on-year, reflecting the recovery of global freight demand.
In terms of external demand, the U.S. manufacturing PMI rose more than expected to 50.5% in March, returning to above the boom and bust line, Japan rebounded by 1 percentage point to 48.2%, and the euro area fell by 0.8 percentage points to 45.7%, and the demand performance of major developed countries was differentiated. In March, the export value of Vietnam and South Korea increased by 15.0% and 3.1% year-on-year, respectively, reflecting the continuous recovery of the Asian supply chain.
In terms of prosperity indicators, new export orders rebounded sharply by 5 percentage points month-on-month to 51.3%, and the import orders index rebounded by 4 percentage points month-on-month to 50.4%, both of which stood on the boom and bust line, reflecting the marginal upward trend of domestic and foreign demand.
From the perspective of price factors, global commodity prices were mixed, with the CRB Composite Spot Index rising by 2.2% month-on-month in March, marginally alleviating the adverse impact on the nominal growth rate of imports and exports.
On the whole, the marginal warming of domestic and foreign demand in March, but the base of the same period last year will affect the year-on-year growth rate. It is estimated that exports in March will be 289.8 billion US dollars, a year-on-year increase of -4.2%, imports will be 207 billion US dollars, an increase of 1.2% year-on-year, and a trade surplus of 82.8 billion US dollars, an increase of 7.5% year-on-year.
CPI:预计3月CPI环比下降0.5%,同比上涨0.5%
Food prices fell back after the Chinese New Year. In terms of pork, pork prices in March fell significantly from February due to the fading of the Spring Festival effect, but in the second half of the year, due to the impact of the early production capacity and the reluctance of some farmers to sell, they rebounded, but they are still at the bottom in the long term. Fresh vegetable prices fell rapidly after the holiday, and the decline slowed down in March, returning to the pre-holiday level as a whole. Fruit prices maintained upward shocks, milk prices fell significantly, and the prices of aquatic products and eggs fluctuated horizontally. On the whole, food prices in March fell normally after the Spring Festival, and due to the later Spring Festival this year, the month-on-month decline in food in March was greater than the historical average.
Energy prices rose month-on-month. International oil prices continued to rise in March, and the price of refined oil products in the mainland rose once at the beginning of the month, and it is expected that the CPI energy price sub-item will rise slightly month-on-month.
Core inflation may fall slightly after the Spring Festival. From the perspective of service activities, service demand remained resilient after the Spring Festival, and its performance was stronger than seasonality. Prices of services in core inflation are expected to fall month-on-month due to the fading of holiday factors. Among the durable consumer goods, it is expected that the price of clothing will rise month-on-month with the listing price of spring clothes, the price of Chinese and Western medicines will maintain a slight trend of recovery, and the price of large durable goods such as automobiles and mobile phones will still maintain a month-on-month decline. In March, rents in large and medium-sized cities across the country fell slightly month-on-month, and residential prices remained at a weak level. It is expected that the core CPI will fall in March year-on-year and month-on-month.
On the whole, the CPI in March is expected to fall by 0.5% month-on-month and increase by 0.5% year-on-year, mainly due to the fading of the Spring Festival.
PPI:预计2月PPI环比下降0.1%,同比下降2.8%
Internationally, since March, global commodity prices have risen as a whole due to the unstable situation in the Middle East and the improvement of world economic demand, international crude oil prices have continued to rise, natural gas prices have flattened, and non-ferrous metal prices have mostly risen.
Domestically, the price differentiation between upstream and downstream is more obvious. The South China Industrial Products Index rose 0.3% month-on-month in March. Among them, the energy and chemical index increased by 1.7% month-on-month, the metal index decreased by 1.5% month-on-month, and the prices of several real estate-related products, such as rebar, cement, and float flat glass, were -5.6%, -0.9%, and -4.3%, respectively. From the perspective of the main prices in the circulation field, among the upstream energy products, the price of oil has risen, natural gas and coal have fallen, ferrous metals have fallen, and non-ferrous metals have risen. Most of the midstream chemicals rose, while cement and float glass fell.
Among the manufacturing PMI sub-items in March, the purchase price index of major raw materials rebounded by 0.4 percentage points to 50.5%, and the ex-factory prices fell by 0.7 percentage points to 47.4%. The upstream and downstream prices are still on both sides of the 50% critical line, and the pattern of differentiation is also shown. Overall, the PPI is expected to fall by 0.1% month-on-month and 2.8% year-on-year in March.
Foreign reserves: Foreign exchange reserves are expected to increase by US$20 billion month-on-month to US$3,245.8 billion at the end of March
In terms of exchange rates, in March, the U.S. dollar index rose by 0.4% month-on-month, while major non-dollar currencies fell, with the yen and the euro depreciating against the U.S. dollar by 0.9% and 0.2% respectively.
In terms of bond prices, market expectations for a U.S. interest rate cut in June have weakened, with the 10-year U.S. Treasury yield falling slightly by 5 basis points from the previous month to 4.2%, the eurozone interest rate cut in June is almost a foregone conclusion, with the 10-year European Treasury yield falling 13 basis points to 2.35%, and the 10-year Japanese bond yield recently announced that Japan has withdrawn from negative interest rates, and the 10-year Japanese bond yield has risen slightly by 1 basis point month-on-month.
In terms of stock prices, global equities broadly rose, with the S&P 500 up 3.1%, the Euro Stoxx 50 up 3.5%, and the Nikkei 225 up 7.9%.
Taking into account the impact of exchange rate translation and asset price changes, the scale of foreign exchange reserves in March may continue the upward trend in February, and it is expected that the external reserves at the end of March will increase by US$20 billion from the end of the previous month to US$3,245.8 billion.
Exchange rate: It is expected that the RMB exchange rate will fluctuate smoothly in both directions in April
Internationally, since March, the U.S. dollar index has fallen first and then risen, and is still above 104. The U.S. job market has shown signs of cooling, with the non-farm unemployment rate unexpectedly rising to 3.9% in February, the highest since January 2022, but the pressure on inflation to rebound remains strong, with CPI rising 0.4% month-on-month in February, the largest increase since September last year, and 3.2% year-on-year, exceeding expectations for two consecutive months.
Despite the slowdown in core PCE year-over-year growth to 2.8% in February, Powell still reiterated that a rate cut is not appropriate until officials are confident that inflation is moving toward the 2% target. Consumer spending pushed the US GDP upward revision to 3.4% in the fourth quarter, indicating that the US economy remains resilient. At present, CME predicts that the Fed's first interest rate cut has been postponed to June, and in the current situation of unclear trends in the US economy and inflation, it is not ruled out that there may still be a postponement in the future.
The U.S. dollar index is likely to remain high in April, but it will be sensitive to unexpected economic data. The interest rate differential between China and the United States remains at a high level, and the RMB exchange rate is under certain external depreciation pressure.
Domestically, the economic data from January to February showed that the domestic economy maintained a stable and rising momentum, of which the resilience of external demand was strong, and the indicators of production, exports, and manufacturing investment were relatively strong, but domestic demand still needs to be further stabilized. According to the latest PMI data, the supply and demand of the manufacturing industry are booming, the prosperity of all kinds of enterprises has improved, and the recovery momentum has reached the highest level in nearly a year; the PMI of the service industry has also rebounded for three consecutive months and is stronger than the seasonality.
Overall, the economic recovery momentum has been stronger than expected, which provides a good fundamental foundation for the smooth operation of the RMB exchange rate. In addition, foreign investors' bond holdings have continued to rebound, and northbound funds have also turned into net inflows in the past two months, indicating that the attractiveness of RMB assets continues to increase.
It is expected that the RMB exchange rate will remain stable in April, fluctuating in both directions around 7.2.
