GDP growth in the first quarter exceeded expectations

Author: Yu Fei

On the morning of April 16, the National Bureau of Statistics released various economic data for the first quarter. Let's analyze them one by one.

01

GDP exceeded expectations

The National Bureau of Statistics discloses:

According to preliminary calculations, the GDP in the first quarter was 296299 billion yuan, a year-on-year increase of 5.3 percent at constant prices, and a quarter-on-quarter increase of 1.6 percent over the fourth quarter of last year. By industry, the added value of the primary industry was 1,153.8 billion yuan, up by 3.3 percent year-on-year, the added value of the secondary industry was 109846 billion yuan, up by 6.0 percent, and the added value of the tertiary industry was 174915 billion yuan, up by 5.0 percent.

Interpretation of this number:

The quarterly growth rate of 5.3% exceeded market expectations by 0.3 percentage points. Previously, a number of institutions predicted an average GDP growth rate of 5% in the first quarter.

The key question is, what is driving the economy to grow more than expected?

From the perspective of three major industries:

The growth rate of the secondary industry (broad industry) has a significant driving effect, with an increase of 6%.

Specifically, the industrial added value in the first quarter increased by 6.1% year-on-year. Among them, the added value of the mining industry increased by 1.6 percent, the manufacturing industry increased by 6.7 percent, and the production and supply of electricity, heat, gas and water increased by 6.9 percent. It can be seen that the strong recovery of the manufacturing industry has promoted the recovery of industrial added value.

From the perspective of products, the output of charging piles, 3D printing equipment and electronic components increased by 41.7%, 40.6% and 39.5% year-on-year respectively, which can be called explosive growth. The growth of these three categories of products was mainly driven by export growth. Data from the General Administration of Customs show that in the first quarter, in dollar terms, exports of integrated circuits increased by 19.7%, exports of general machinery and equipment increased by 15.5%, and exports of auto parts increased by 8.8%.

From the perspective of consumption, exports, and investment in the troika that drives economic development:

The resurgence of investment is the main driver.

In terms of consumption in the first quarter, it was still weak, with a year-on-year increase of only 3.1% in March, and the growth rate has been declining since peaking in November last year.

Source: National Bureau of Statistics

In terms of exports, the first two months were good, with China's exports increasing by 10.3 percent in renminbi terms and 7.1 percent in dollar terms.

However, growth was negative again in March. In March, exports fell by 3.8% in renminbi terms and 7.5% in dollar terms.

Only investment, data is okay. In the first quarter, the growth rate of fixed investment was 4.5%, which is not high, but it can be seen from the trend that since the end of the continuous downward investment growth rate in October last year, it has been on the rise. The growth rate of 4.5% hit a new high since May last year.

Source: National Bureau of Statistics

This is the first quarter of the expected growth.

However, under the unexpected growth, there are still hidden worries and uncertainties.

It is mainly manifested in the weakness of consumption, the re-turnaround of exports, and the decline in industry caused by the decline in exports. In March, the added value of industrial enterprises above designated size decreased by 0.08 percent from the previous month.

02

Exports remain fraught with uncertainty

Exports, after achieving gorgeous data in the first two months, turned around in March.

In the first two months, China's exports rose 10.3 percent in renminbi terms and 7.1 percent in dollar terms, while in March, they fell by 3.8 percent in renminbi terms and 7.5 percent in dollar terms.

As a result, exports increased by 4.9 percent in renminbi terms and only 1.5 percent in dollar terms in the first quarter.

By region, the Association of Southeast Asian Nations (ASEAN) was our largest exporter, with exports up 4.1% in US dollar terms in the first quarter. This was followed by the European Union, where exports fell by 5.7% in the first quarter. This was followed by the United States, where exports fell by 1.3% in the first quarter. This was followed by Hong Kong, China, with exports up 10.7% in the first quarter. This was followed by Latin America, where exports rose by 9.3 percent in the first quarter, and Africa, which grew by 4.4 percent.

By region, exports to Vietnam grew the fastest in the first quarter, with an increase of 18.5%. This was followed by Hong Kong, China, with an increase of 10.7%.

Most exports to developed countries are experiencing negative growth. Exports to the Netherlands fell by 21.1%. Exports to South Korea fell by 9.3%, exports to Australia by 8.9%, and exports to Japan, Singapore, Germany, the United States, and the United Kingdom all declined. Exports to the developing country Philippines also fell by 14.4 per cent.

Graphics: City Finance, Data: General Administration of Customs

The resurgence of negative export growth is the result of a weakening global economy and intensifying geopolitical impulses. The Red Sea crisis, the intensification of the Russia-Ukraine war, and the Middle East being mired in regional wars are all negative for exports.

Exports affect a wide area. It is related to our industrial development, related to corporate profits, and also related to employment.

China is a big manufacturing country, and our development model was mainly driven by foreign trade.

If exports are strong, domestic factories can be operated, and vice versa, they will face a shutdown. In the same way, strong exports can lead to increased corporate profits, expanded firms, and more jobs.

The Ministry of Commerce previously disclosed a data that the foreign trade industry has driven 180 million jobs.

Now that exports are experiencing negative growth again, employment pressure is increasing, factory profit pressure is increasing, corporate layoffs are increasing, and economic growth uncertainty is also increasing.

This year's government work report proposes that the expected GDP growth target for 2024 is about 5%. More than 12 million new jobs were created in urban areas.

These goals need to be exported to provide their own power.

03

Real estate is still going crazy for a correction

The data on real estate shows that it is still adjusting frantically.

The National Bureau of Statistics discloses:

In the first quarter, the national real estate development investment was 2,208.2 billion yuan, down 9.5 percent year-on-year, of which residential investment was 1,658.5 billion yuan, down 10.5 percent.

Source: National Bureau of Statistics

This data, since it turned negative in April 2022, has not returned to positive, although there was a period of narrowing the decline during the period, but it was only narrowing, and it did not change the downward situation of investment.

This means that the enthusiasm for land acquisition and construction in the real estate market has continued to decline for nearly two years.

The National Bureau of Statistics discloses:

The sales area of newly built commercial buildings was 226.68 million square meters, a year-on-year decrease of 19.4%, of which the sales area of residential buildings decreased by 23.4%. The sales of newly built commercial buildings were 2,135.5 billion yuan, down by 27.6 percent, of which residential sales fell by 30.7 percent.

Source: National Bureau of Statistics

In 2023, our real estate is cold enough. The sales volume and sales of commercial housing have been declining.

In 2022, the sales area and sales of commercial housing in China have been adjusted from "Double 18" to "Double 13", that is, the sales area of 1.8 billion square meters and sales of 18 trillion yuan have been adjusted to about 1.3 billion square meters and 13 trillion yuan respectively. In 2023, the sales area of commercial housing will fall to 1.117 billion square meters, and the sales volume will fall to 11.66 trillion yuan, falling to "Double 11".

However, judging by the performance in the first quarter of this year, there is no coldest, only colder. It is estimated that the sales of commercial housing in 2024 may fall directly to around "Double 8".

In terms of regions, real estate investment, commercial housing sales area, and commercial housing sales declined across the board.

Real estate investment, led by the Northeast, fell 18.9% in the first quarter, followed by the Western, Central, and Eastern regions.

The area of commercial housing sales led the decline, with a decline of 23.9% in the first quarter, followed by the west, east and northeast.

Commercial housing sales led the decline, with a decline of 28.9% in the first quarter, followed by the eastern, western and northeastern regions.

Source: National Bureau of Statistics

Housing prices, too, can't bear to look at.

The latest data on housing prices in 70 large and medium-sized cities in February disclosed by the National Bureau of Statistics show that:

Among the 70 cities that can best reflect the market conditions, only Fuzhou increased by 0.1 month-on-month, and the rest all declined. Year-on-year, that is, compared with the same period last year, 70 cities fell across the board.

Therefore, this number has been emphasizing that the real estate adjustment is far from over.

This issue emphasizes the current point of view of buying and selling houses:

First, the speculators who stand guard in a high position can sell them now, don't delay, the more they delay, the bigger the loss. Speculators who have already earned the sweetness should accept it when they see it, otherwise the money they earned by luck at the beginning will be spit out in the future with their ability.

Second, as for middle-class families with only one house, what they need to do in the future is to do everything possible to reduce rigid debt and shrink the family's debt sheet.

In terms of buying a house, there is no hard demand, there is no urgent demand, especially for people who need to increase leverage to buy a house, which can be postponed.

For those who have the need to live in their own homes, go to school with their children, and get married, pick a good house, and if the income is affordable, you can buy it, and you can make psychological expectations.

Of course, no matter how sluggish the market is, there will always be demand, but there is only a difference between more and less. At present, both new and second-hand houses have entered the buyer's market.

If you really want to buy it, you can do it too. After all, in the current market, there is a big advantage for home buyers, and now it is you who pick the product, not the product that picks you.

But you need to be mentally prepared to withstand the decline in housing prices, this is the cognition.