The economy grew by 5.3% more than expected in the first quarter, why did shareholders vote with their feet and cause A-shares to dive?

Mars macroscopic

2024-04-17 06:30Posted in Hunan Finance and Economics Creator

Executive Summary:

GDP grew by 5.3% in the first quarter, but the stock market did not appreciate it, with Shanghai and Shenzhen falling 1.65% and 2.29% respectively. The reasons for this are: first, the price index shows a relatively serious weakness in demand and oversupply, and second, investors feel more deeply about consumer spending. Based on the disclosed consumption data, the comparable price increase in GDP on the expenditure method is much lower. Third, the income growth rate announced by the National Bureau of Statistics is quite different from everyone's actual feelings. Fourth, the data in March has become worse than that in January and February, and the recent data has deepened investors' judgment on the cold economy.

GDP grew by 5.3% more than expected in the first quarter, but the stock market did not appreciate it, with Shanghai and Shenzhen falling by 1.65% and 2.29% respectively.

Although the crisis of real estate enterprises has deepened, trusts have also been dragged into the water, and urban investment bonds that are unable to repay principal and interest are still waiting to be rescued, but relying on loose monetary policy, firm fixed asset investment and manufacturing growth that continues to increase production capacity with the hat of overcapacity, the National Bureau of Statistics said that China's economy got off to a good start in the first quarter, and the growth rate was faster than expected.

According to official data, gross domestic product (GDP) in the first quarter of 2024 was 296299 billion yuan, up 5.3% year-on-year at constant prices and 1.6% quarter-on-quarter from the fourth quarter of the previous 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.

Of course, at current prices, it would be only 4% year-on-year.

But whatever the reason, GDP growth in the first quarter exceeded expectations. On April 15, Saburo estimated that "the comparable price growth rate of GDP in the first quarter was about 5%, and the current price growth rate was about 4.1%" in the article "The market's willingness to increase debt was insufficient in March, and the monetary expansion intensity contracted significantly". Analysts calculated by Reuters expect our economic growth to slow to 4.6% in the first quarter of 2024 (comparable prices, the same below), Bloomberg expects us to grow by 4.8% in the first quarter, and the most optimistic institutions expect us to grow by 5.0% in the first quarter.

However, hundreds of millions of stock market investors did not seem to buy this report card of unexpected growth, and the Shanghai and Shenzhen stock markets fell sharply.

On the 16th, the Shanghai Composite Index fell 1.65% to close at 2007.07, and the 3,000-point integer mark was in jeopardy. The Shenzhen Composite Index fell 2.29% to close at 9,155.07 points. The CSI 300 index fell 1.07% to close at 3,511.11 points.

Some say stocks fell on Tuesday because of the positive clearing of the stock market, while others say it was because the market feared that Israel would respond strongly to Saturday's large-scale Iranian attack. Saburo thinks neither of these claims is reliable. The contradiction between macroeconomic growth exceeding expectations, oversupply and weak demand, and the contrast between the high temperature of macro data and the cold feeling of micro data may be the main reason for investors to have doubts about macro data.

2. Contrary to the larger-than-expected economic growth, the price index, which measures the balance between supply and demand, shows a relatively serious weakness in demand and oversupply.

Although we have taken monetary easing measures to stimulate consumption since the end of 2021, because the funds have flowed to the government and state-owned enterprises, not to the household sector, the currency M2 in circulation and the stock of social financing have increased by about twice GDP without bringing a boom in consumption.

In the first quarter, the national consumer price index (CPI) was flat year-on-year. Among them, it fell by 0.8% in January, rose by .7% in February and rose by 0.1% in March. It fell 0.1% month-on-month in March.

In the first quarter, the national industrial producer price (PPI) fell by 2.7% year-on-year. Among them, it fell by 2.5% in January, 2.6% in February, 2.8% in March, and 0.1% month-on-month.

In the first quarter, the purchase price of industrial producers fell by 3.4% year-on-year. Among them, it fell by 3.4% in January and February, 3.5% in March, and 0.1% month-on-month.

If the reader cannot get a clear price data from the three indices of retail, wholesale, and corporate purchases, we can use the year-on-year increase in current prices and comparable prices of GDP to calculate the GDP price contraction coefficient including all areas of the national economy, that is, the price index corresponding to the GDP caliber.

In the first quarter, GDP at comparable prices increased by 5.3% year-on-year, current prices increased by 4% year-on-year, and the composite price index fell by 1.27% year-on-year.

The implication of this data is that the comprehensive prices, including consumption, fixed asset investment, real estate, import and export, industrial purchase and sales, etc., decreased by 1.27% from the first quarter of last year. This also means that while the central bank has cut interest rates by 0.2% over the past year, real interest rates have increased by 1.08%.

3. The GDP released by the National Bureau of Statistics is calculated according to the production method, but investors feel more deeply about consumer spending. According to the disclosed consumption data, the comparable price growth of GDP on the expenditure method is only about 3.4%.

Investors themselves are also consumers, and they have a better understanding of the consumer market, the real estate market, exports and other data, and from this point of view, there is indeed a large gap with the GDP estimated by the National Bureau of Statistics using the production method.

Currently, the National Bureau of Statistics publishes data from most expenditure perspectives.

1. In the first quarter, the national investment in fixed assets (excluding rural households) was 100042 billion yuan, a year-on-year increase of 4.5%;

2. In the first quarter, the sales of newly built commercial buildings nationwide were 2,135.5 billion yuan, down 27.6 percent;

3. In the first quarter, the total retail sales of consumer goods 120327 billion yuan, a year-on-year increase of 4.7%;

4. In the first quarter, the added value of the tertiary industry was 174915 billion yuan, and the current price increased by 5.7% year-on-year;

5. The surplus of merchandise trade in the first quarter was 1,306.4 billion yuan, a year-on-year decrease of 7.3%;

6. From January to February 2024, the mainland's service trade exports were 486.17 billion yuan, an increase of 17.9%, imports were 704.9 billion yuan, an increase of 26.5%, and the service trade deficit was 218.73 billion yuan. According to this growth rate and the data of the first quarter of 2023, it is estimated that the surplus of service trade in the first quarter of 2024 will be -340.6 billion yuan, and that of -223 billion yuan in the same period;

7. Half of the sum of items 2-3 plus item 4 is roughly similar to retail + services + government consumption. The sum of items 5-6 is net exports;

8. The GDP price contraction coefficient is calculated according to the 1.27% year-on-year decline of the National Bureau of Statistics based on the increase in GDP current prices and comparable prices.

According to the above data, the current price of GDP in the first quarter increased by 2.1% year-on-year, 1.9 percentage points lower than the 4% of the production method, and the constant price increased by 3.4% year-on-year, 1.9 percentage points lower than the 5.3% of the production method.

Fourth, the growth rate of average disposable income announced by the National Bureau of Statistics is quite different from everyone's actual feelings.

The ultimate goal of macroeconomic growth is to translate into income and welfare for residents.

In the first quarter, the national per capita disposable income announced by the National Bureau of Statistics was 11,539 yuan, a nominal increase of 6.2% year-on-year. The median per capita disposable income of residents nationwide was 9,462 yuan, a nominal increase of 6.4 percent year-on-year.

In terms of sources of income, the per capita wage income, net operating income, net property income, and net transfer income of residents nationwide increased by 6.8 percent, 6.8 percent, 3.2 percent, and 4.8 percent respectively in nominal terms.

However, from their own point of view, it is difficult for investors to feel the increase in income, which is not as frequent as the sharp increase in macro data. In particular, there are few wage increases, the total income of schools, hospitals, banks, and some local institutions is declining, and it is becoming more and more difficult to find a job.

According to data released by the Ministry of Finance on March 22, from January to February 2024, the corporate income tax was 1,017 billion yuan, the same as the same period last year, and the personal income tax was 326.2 billion yuan, down 15.9% year-on-year.

GDP has grown, but most people's incomes have actually decreased, and tax regulations have become stricter, and the country's personal income tax has been significantly reduced when tax rates have not changed. Therefore, shareholders have no feeling of income growth. Many households have also become more cautious in spending as they lack confidence in the economic outlook due to falling incomes.

The data for May and March has become worse than that of January and February, and recent data has deepened investors' judgment that the economy is cold.

From January to February this year, retail sales, exports and price indices all showed a marked improvement in the economy, but by March, all the data were falling.

From January to February, the retail sales of social goods increased by 5.5% year-on-year, falling to 3.1% in March; from January to February, the export of RMB of goods increased by 10.3% year-on-year, and turned to a decline of 3.8% in March; and the CPI rose by 0.7% year-on-year in February, falling to 0.1% in March.

In terms of market expectations, industrial output rose 4.5% year-on-year in March, lower than the expected 6%, retail sales increased by 3.1% year-on-year, lower than the expected 4.6%, and exports fell 3.8%, lower than the expected growth of 5%. The CPI rose 0.1%, below expectations of 0.4%.

Although the economy did well in the first quarter, it was mainly contributed by January and February. However, January and February have become long-term memories, and March, when various data fell sharply, is the latest data in investors' heads. And the latest data naturally represents the latest trend in the economy.

[Author: Xu Sanlang]

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Personal opinion, for reference only