GDP growth rate of 5.3% in the first quarter, why did it exceed expectations?

On April 16, the National Bureau of Statistics released the operation of the national economy in the first quarter of 2024. 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.

"In the first quarter, with the joint efforts of all regions and departments, we will intensify the implementation of macro policies, make efforts to implement policies, pay close attention to implementation, and promote the continuous recovery of the national economy in the first quarter and a good start. At a press conference held by the State Council Information Office on April 16, Sheng Laiyun, deputy director of the National Bureau of Statistics, said that four key words were used to evaluate the economic operation in the first quarter: continuous recovery, steady start, steady progress, and good start.

GDP growth in the first quarter exceeded expectations

According to the data, GDP grew by 5.3% year-on-year in the first quarter, 0.1 percentage points faster than the previous quarter. The seasonally adjusted quarter-on-quarter growth rate was 1.6%, equivalent to an annualized growth rate of 6.6%, and the quarter-on-quarter growth rate accelerated by 0.6 percentage points from the previous quarter.

GDP grew by 5.3% year-on-year in the first quarter, which exceeded market expectations.

Zong Liang, chief researcher of the Bank of China, said that the economic growth rate in the first quarter can reach 5.3%, which is generally higher than the general expectation of the market, which can be said to consolidate the recovery momentum, and from a global perspective, this is also a very high growth rate, which is also consistent with the potential economic growth rate in the next few years.

Wen Bin, chief economist of Minsheng Bank, said that on the whole, the mainland's GDP growth in the first quarter was better than market expectations, indicating that the current economic vitality has been strengthened, and a good start has been successfully achieved, laying a solid foundation for achieving the annual target of 5.0%.

"But in March, the economy showed signs of marginal cooling. The year-on-year growth rate of industrial added value, service industry production index, retail sales of consumer goods, and real estate development investment all slowed down, and only the growth rate of infrastructure investment and manufacturing investment accelerated, which played a supporting role to a certain extent. Wen Bin believes that in the next stage, if the momentum of economic recovery is to be stabilized, more efforts need to be made in the implementation of policies.

In the view of Wang Qing, chief macro analyst of Oriental Jincheng, there are three main factors behind the GDP growth rate exceeding the general expectations of the market in the first quarter: first, the early RRR cut, LPR interest rate cut, and the recent policy to launch large-scale equipment renewal and durable consumer goods trade-in measures, the effect of boosting domestic demand is gradually reflected. Second, represented by the rapid growth of service consumption and manufacturing investment, the current endogenous growth momentum of the economy is also improving, of which the investment in high-tech manufacturing, which represents the development direction of new quality productivity, increased by 10.8%. Third, due to cyclical factors, overseas demand at the beginning of the year was also picking up as a whole.

Real estate may need a larger policy stimulus

According to the data, in the first quarter, the national investment in fixed assets (excluding rural households) 100042 billion yuan, a year-on-year increase of 4.5 percent, an increase of 1.5 percentage points over the previous year, and after deducting real estate development investment, the national investment in fixed assets increased by 9.3 percent.

By sector, infrastructure investment increased by 6.5 percent, manufacturing investment increased by 9.9 percent, and real estate development investment fell by 9.5 percent. The sales area of newly built commercial buildings nationwide was 226.68 million square meters, down 19.4 percent year-on-year, and the sales of newly built commercial buildings were 2,135.5 billion yuan, down 27.6 percent. In March, investment in fixed assets (excluding rural households) increased by 0.14% month-on-month. By industry, investment in the primary industry increased by 1.0 percent, investment in the secondary industry increased by 13.4 percent, and investment in the tertiary industry increased by 0.8 percent.

Zhao Bo, a tenured associate professor of economics at Peking University's National School of Development, believes that in general, the financing of real estate enterprises has improved, but the demand for housing has not fully recovered, and more large-scale policy stimulus may be needed. In his view, real estate plays a vital role in investment and is one of the main sources of extra-budgetary revenue for local governments. Therefore, the stability of the real estate market is crucial.

Zhao Bo mentioned that at present, the state has adopted a series of policies to deal with the challenges, launched policies such as guaranteeing the delivery of buildings and bailing out funds, and emphasized the need to treat all types of ownership entities equally, and at the same time launched a "white list" system for real estate projects.

When it comes to real estate, Sheng Laiyun said that from the perspective of real estate investment and sales in the first quarter, the real estate market is still in the process of adjustment. Sheng Laiyun stressed that China's real estate market still has the support conditions for sustained and healthy development, and we must look at this round of real estate adjustment rationally.

On the one hand, after more than 20 years of rapid expansion in the real estate industry, it is normal to adjust now according to the industrial growth cycle. The phased adjustment of real estate is conducive to the subsequent construction of a new model of real estate and the realization of high-quality development. Because traditional production capacity can be cleared in the market, developers can build better houses and provide better services, which is also beneficial to consumers.

On the other hand, China's real estate market is supported, with the urbanization rate of the permanent population in 2023 being 66.2%, but the urbanization rate according to the registered population is less than 50%, and there are still 297 million migrant workers in the city who are not fully urbanized, and the proportion of these migrant workers who enter the city to buy houses is not high. With the improvement of people's living standards and the deepening of urbanization, China's real estate market is still relatively large in terms of improvement demand and rigid demand.

The CPI will slowly pick up at a low level

In the first quarter, the national consumer price index (CPI) was flat year-on-year. By category, the prices of food, tobacco and alcohol decreased by 1.7 percent, clothing by 1.6 percent, housing by 0.2 percent, daily necessities and services by 0.8 percent, transportation and communications by 1.4 percent, education, culture and entertainment by 2.3 percent, medical care by 1.4 percent, and other articles and services by 2.9 percent.

Among the prices of food, tobacco and liquor, the price of fresh fruits decreased by 7.3 percent, the price of pork decreased by 7.0 percent, the price of fresh vegetables decreased by 3.9 percent, and the price of grain rose by 0.4 percent. Core CPI, which excludes food and energy prices, rose 0.7% year-on-year. In March, the national consumer price rose by 0.1 percent year-on-year and fell by 1.0 percent month-on-month.

Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, said that household consumption maintained expansion in the first quarter, but commodity consumption was weak. In the first quarter, the growth rate of retail sales of consumer goods maintained expansion, but the growth rate hit a 12-month low, mainly due to the weak consumption expenditure on goods, and the service consumption represented by catering maintained a rapid growth rate. The sluggish sales of goods are mainly due to the fact that domestic residents' consumer confidence and willingness are in the recovery stage, and the overall sluggish performance of real estate has also caused a certain drag on household consumption.

"In terms of trends, it is expected that the momentum of household consumption is expected to increase moderately. Zhou Maohua believes that on the one hand, the overall stability of resident employment, the growth rate of real income is faster than economic growth, the trend of residents' consumer confidence and willingness to recover, coupled with the trade-in of domestic consumer goods, the real estate market gradually stabilized and recovered, etc., commodity consumption is expected to return to the trend level;

Judging from the future trend, Sheng Laiyun believes that CPI will slowly rise at a low level. On the one hand, the economy continues to improve and aggregate demand is rebounding, which is a very important fundamental factor to support the rebound of CPI. In addition, the prices of some agricultural products have also reached an inflection point in price adjustment, such as the price of live pigs. In addition, the next holiday consumption, including May Day, will continue to drive the recovery of tourism-related travel consumer prices. In addition, there are some factors that promote the recovery of demand, which will have a certain impact on the recovery of prices.