GDP growth in the first quarter exceeded expectations for two consecutive years, and industrial capacity utilization was at a historic low
On April 16, the National Bureau of Statistics released economic data for the first quarter, with real GDP growing by 1.6% quarter-on-quarter and 5.3% year-on-year, slightly higher than Q4 2023, and nominal GDP growing by 4.2% year-on-year, unchanged from Q4 2023. Real GDP growth once again exceeded market expectations, and also exceeded our expectations. Our forecasts were wrong because we used a less stable QoQ-YoY forecast, rather than a direct year-on-year forecast. We expect seasonally adjusted quarter-on-quarter growth of 1.5%, but the quarter-on-quarter growth rate in 2023 has been revised from 2.1%, 0.6%, 1.5%, and 1.0% to 1.8%, 0.5%, 1.8%, and 1.2%, and the latter three quarters are revised upwards by a higher margin, so the forecast error is large.
The GDP growth rate in the first quarter of 2023 also exceeded market expectations, causing domestic and foreign investment and research institutions to raise their GDP growth forecasts. However, in the end, the actual annual growth rate of 5.2% was lower than the GDP growth forecast before the upward revision of most institutions, and slightly higher than the GDP growth target of about 5%.
The reason why the economic growth in 2023 is lower than expected is that on the demand side, real estate is a drag on fixed asset investment and private investment in the tertiary industry, and on the production side, it is because the year-on-year growth rate of industrial production from May to August 2023 is low.
GDP growth in the first quarter of 2024 exceeded expectations, on the one hand, because the investment in fixed assets in the secondary industry increased by 13.4%, the investment in fixed assets increased by 4.5% year-on-year, and the real growth rate was 5.9%, on the other hand, because the recovery of external demand and the depreciation of the RMB caused exports to increase by 4.9%, higher than 0.6% in 2023. In terms of production, it was because the industrial added value increased by 6%, which was significantly higher than the same period last year and the fourth quarter. Therefore, whether China's economic growth rate in 2024 can achieve its target depends on whether investment and exports in the secondary industry can maintain a relatively high growth rate, and whether the growth rate of industrial production can maintain a high level.
In the first quarter of 2024, the national industrial capacity utilization rate above designated size will be 73.6%, ranking at a historical low, only higher than that in 2009, 2016 and the first quarter of 2020. Low capacity utilization means insufficient demand and excessive investment, which suppresses the rise in industrial product prices and is not conducive to maintaining high growth in industrial investment. The higher investment in the secondary industry in the first quarter may be a non-market-oriented behavior, and the central state-owned enterprises responded to the policy to actively promote equipment renewal and expand investment. The higher growth rate of industrial production is more likely to be due to a low base, after which a higher base will form a certain drag on the growth of industrial production in 2024. The low base of export growth in 2023 and the resilience of the U.S. economy and inflation will support the export growth rate in 2024.
In terms of industries, the capacity utilization rate of chemical fiber, textile, computer, communication and other electronics, chemical raw materials, medicine, oil and gas, and non-ferrous metals increased over the same period last year, of which the capacity utilization rate of chemical fiber and oil and gas was higher than 80%, and the supply and demand situation was relatively good. The capacity utilization rate of automobiles, electrical equipment, coal, non-metallic minerals, and food manufacturing decreased compared with the same period last year, of which the capacity utilization rate of non-metallic minerals and automobiles was less than 65%, and the capacity utilization rate of electrical equipment was less than 75%, both of which were the lowest since 2021.
Combined with the growth rate of PPI and industrial added value (PPI is given 2 times the weight), the prosperity of non-ferrous metals, oil and gas, railways, ships and aviation, computer communication and electronics, wine and beverage, and automobile was better in the first quarter. Coal, non-metallic minerals, agricultural and sideline food processing, and electrical equipment are relatively prosperous.
Entering the off-season (March, April, May and October), the growth rate of thermal power has declined, and the growth rate of hydropower, wind power and solar power generation has accelerated. In the first quarter, industrial power generation above designated size increased by 6.7% year-on-year. In March, industrial power generation above designated size increased by 2.8% year-on-year, with an average daily power generation of 24.12 billion kilowatt hours. Among them, industrial thermal power above designated size increased by 0.5% year-on-year, down 9.2 percentage points from January to February, industrial hydropower above designated size increased by 3.1%, growth rate accelerated by 2.3 percentage points from January to February, industrial nuclear power above designated size decreased by 4.8%, with an increase of 3.5% from January to February, industrial wind power above designated size increased by 16.8%, the growth rate was 11.0 percentage points faster than that from January to February, and industrial solar power generation above designated size increased by 15.8%, with a growth rate of 0.4 percentage points faster than that from January to February.
The prosperity of the information service industry and the business service industry is relatively high. In the first quarter, the added value of the service industry increased by 5.0% year-on-year. Among them, the added value of information transmission, software and information technology services, leasing and business services, transportation, warehousing and postal services, accommodation and catering, and wholesale and retail trade increased by 13.7 percent, 10.8 percent, 7.3 percent, 7.3 percent, and 6.0 percent respectively. In March, the national service industry production index increased by 5.0% year-on-year, and with the high base last year, the downward pressure on the year-on-year growth rate of the service industry index in April increased.
Income distribution is skewed in favor of workers, and the income of low-income groups has grown rapidly. In the first quarter, the per capita disposable income of residents nationwide increased by 6.2 percent in nominal terms and 6.4 percent in median, both higher than the nominal GDP growth rate. In terms of urban and rural areas, the per capita disposable income of urban residents increased by 5.3 percent and the median by 5.7 percent, while the per capita disposable income of rural residents increased by 7.6 percent and the median increased by 7.8 percent.
Consumption is growing faster than income, putting sustainability under pressure. The nominal growth rate of per capita consumption expenditure was 8.3 percent, higher than the growth rate of disposable income. In 2020, the epidemic caused a positive difference in the growth rate of consumer income, and residents were forced to save, in 2021 there was revenge consumption, in 2022 they were forced to save, and in 2023 they will usher in revenge consumption again. In the first quarter, the total retail sales of consumer goods increased by 4.7% year-on-year, and in March, it increased by 3.1%. If consumption returns to normal, the growth rate gap of consumption income converges, and the impact of the high base in April-May and the fourth quarter, the sustainability of future consumption growth will be under pressure. In terms of urban and rural areas, the per capita consumption expenditure of urban residents increased by 7.7 percent, and that of rural residents increased by 9.1 percent. Consumption is sinking, and discount sales opportunities are better.
The growth rate of commodity and catering consumption is roughly the same. However, the epidemic in 2020 has disrupted the growth rate relationship between the two, and with the attenuation of the disturbance effect, the growth rate of catering consumption in the future will be close to the growth rate of commodity consumption, and the growth rate of total social zero will be comparable.
Judging from the data of household consumption expenditure, the growth rate of consumption expenditure on transportation and communication, clothing, education, culture and entertainment, food, tobacco and alcohol is higher than 10%. In the corresponding zero data, the growth rate of sports and entertainment, communication equipment, tobacco and alcohol, and food consumption is higher. Enterprises have reduced their costs, and the growth rate of office supplies and daily necessities is low, while the growth rate of medicine, jewelry, petroleum, and clothing is low due to the high base.
Commercial housing is exchanged for price, and second-hand housing in first-tier cities is under greater selling pressure. In the first quarter of 2024, the sales area of newly built commercial housing decreased by 19.4% year-on-year, and the sales of newly built commercial housing decreased by 27.6%, both of which converged from February. In March, the transaction volume of newly built commercial housing and second-hand housing in 70 large and medium-sized cities increased compared with the previous period, and the year-on-year decline in the sales price of commercial housing in all tiers of cities expanded (the month-on-month was affected by seasonal factors, and the year-on-year data was more accurate). The sales prices of newly built commercial residential buildings in first-tier cities decreased by 1.5% year-on-year, an increase of 0.5 percentage points from the previous month, and the sales prices of second-hand residential buildings decreased by 7.3% year-on-year, an increase of 1.0 percentage points from the previous month. The sales prices of newly built commercial residential buildings in second- and third-tier cities decreased by 2.0% and 3.4% year-on-year respectively, an increase of 0.9 and 0.7 percentage points respectively from the previous month, while the sales prices of second-hand residential buildings decreased by 5.9% and 5.7% year-on-year respectively, an increase of 0.8 and 0.6 percentage points respectively from the previous month. Second-hand homes in Beijing, Shanghai, Guangzhou and Shenzhen fell by 6.4%, 6.9%, 8.6% and 7.4% respectively. New homes in Beijing and Shanghai rose 0.8% and 4.3% respectively, while new homes in Guangzhou and Shenzhen both fell 5.5%.
Sales are sluggish, the decline in funds in place is expanding, and the liquidity pressure of real estate enterprises is increasing. The funds in place for real estate development enterprises decreased by 26.0% year-on-year. Among them, domestic loans decreased by 9.1 percent, self-raised funds decreased by 14.6 percent, deposits and advance receipts decreased by 37.5 percent, and personal mortgage loans decreased by 41.0 percent.