Source of this article: Times Finance Author: Li Yiwen
Consumption is indisputably the main engine of economic growth today.
On April 16, the first quarter report of China's economy in 2024 was released, and the much-watched consumption data was also released. According to the National Bureau of Statistics, the gross domestic product (GDP) in the first quarter was 296299 billion yuan, a year-on-year increase of 5.3%, of which consumption contributed 73.7% to economic growth.
Judging from the specific consumption data, on the basis of the high base in the same period last year, the total retail sales of consumer goods in the first quarter of this year still maintained a steady growth of 4.7%, with the total exceeding 12 trillion yuan, reaching 120327 billion yuan. Among them, the total retail sales of consumer goods other than automobiles in March were 3,902 billion yuan, a year-on-year increase of 3.1 percent, and the retail sales of consumer goods other than automobiles were 3,496.8 billion yuan, an increase of 3.9 percent.
Source: Picture Worm Creative
Service consumption, represented by catering, maintained double-digit growth, with a year-on-year growth rate of 10.0%. Although the consumer expenditure on goods is relatively weak, it still maintained a growth rate of 4.0% on the basis of the high base of the same period last year.
However, Times Finance noticed that although consumption still maintained expansion in the first quarter, the growth rate slowed down significantly. In March, the growth rate of total social zero fell by 2.4 percentage points from the previous value, the second lowest point in the past 12 months, and the year-on-year growth rate of 3.1% was also quite different from the market's growth expectation of 4.83%. The year-on-year growth rate of automobile consumption turned from positive to negative, down 12.4 percentage points to -3.7%.
"There have been new changes in the consumption structure of the market. "Some risks and hidden dangers have accumulated for a long time, and we need to further intensify our work. On April 17, at the macroeconomic situation and policy conference held by the State Council Information Office, Yuan Da, deputy secretary-general of the National Development and Reform Commission and director of the Comprehensive Department of National Economy, also pointed out that there is a lack of effective demand in economic operation, and the production and operation of enterprises in some industries are more difficult.
At present, consumption has become the main engine driving China's economy, and while the overall economic performance in the first quarter is outstanding, why has the growth rate of social zero continued to slow down? What is the potential of China's consumption in the future?
Consumption growth slowed down significantly
The slowdown in the growth rate of the zero social sector in March is not without a trace, and the growth rate of the social zero has been declining for four consecutive months since November last year. In November 2023, the year-on-year growth rate reached 10.1%, in December 2023 it was 7.4%, and in January-February 2024 it slowed further to 5.5%, and by March 2024, the growth rate had slipped to 3.1%.
The year-on-year growth rate of total social zero has continued to decline since November 2023. (Source: National Bureau of Statistics)
The CPI (National Consumer Price Index), which also reflects consumer demand, has also been sluggish recently. The CPI in the first quarter was flat year-on-year, of which the CPI rose 0.1% year-on-year in March, down 0.6 percentage points from the previous month. Even the core CPI (excluding the core of food and energy), from the data, in the first quarter, the core CPI increased by 0.7% year-on-year, less than 1%, and 0.1 percentage points lower than the same period last year.
In fact, affected by the high base in the same period last year, the market has certain expectations for the decline in the zero growth rate in March, but the actual decline is still beyond market expectations. According to Wind data statistics, before the release of the data, 14 domestic and foreign financial institutions, including Donghai Securities, GF Securities, and Nomura Orient Securities, had an average forecast of 4.83% for the growth rate of the company, with a forecast range of 2.7%-9.6%.
"There is an impact on the base, but the overall consumption expenditure on goods is still significantly lower than the average level relative to the consumption expenditure on services. Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, told Times Finance that the slowdown in the first quarter of the zero growth rate was mainly dragged down by weak consumer spending on goods. The weak consumer spending on goods is related to the recovery stage of domestic residents' consumption confidence and willingness, as well as the sluggish overall performance of real estate.
In addition to being affected by residents' willingness to consume, Wen Bin, chief economist of Minsheng Bank, also believes that this is also related to the fact that residents' consumption power is still weak. "In March, the surveyed urban unemployment rate fell to 5.2% from 5.3% in the previous month, but the surveyed unemployment rate of the migrant agricultural population rebounded to 5.0% from 4.8% in the previous month. Between the rise and fall, it shows that with the decline in the prosperity of the life service industry, the ability to create employment declines, which may affect the consumption power of residents. ”
Wu Chaoming, vice president of the Institute of Finance and Credit, also holds the same view. In an interview with Times Finance, he said, "From January to March, the retail sales of goods below the quota increased by 4.5%, which is still lower than the growth rate above the social zero and above the quota." This indicates that the income and consumption of low- and middle-income groups have gradually improved due to the negative feedback loop of 'weak prices, weak expectations, and weak reality', but the overall income and consumption are still low, which is due to the continued weakness of real estate, private investment and urban investment, which is related to the weakening of employment absorption. ”
The willingness to deposit remains strong
As the main engine driving China's economic growth at present, will the slowdown in consumption growth affect the recovery of the economy? In the first quarter of this year, the total amount of social zero exceeded 12 trillion yuan, and is there any potential for further growth in consumption in the future?
In this regard, Xu Hongcai, deputy director of the Economic Policy Committee of the Chinese Society for Policy Sciences, believes that the slowdown in consumption growth will lead to insufficient demand, which may lead to overcapacity in some industries, which will affect the activity of the industry and the economy. Therefore, the top priority at the moment is to ensure fair income distribution and improve the social security system.
Xu Hongcai told Times Finance that there is a large gap in the current social income distribution, and the social security for some low-income groups such as migrant workers is insufficient, resulting in a considerable number of consumers "dare not spend money".
In fact, in the context of slowing consumption growth and low deposit rates, residents' willingness to deposit is still strong. According to central bank data, RMB deposits increased by 11.24 trillion yuan in the first quarter, of which household deposits increased by 8.56 trillion yuan, rising for five consecutive months since October last year.
As of the end of February 2024, the balance of household deposits was 143.24 trillion yuan, and according to this calculation, the balance of household deposits at the end of March has exceeded 150 trillion yuan, reaching 151.8 trillion yuan, accounting for more than half of the overall balance of RMB deposits.
Source: Picture Worm Creative
"There is still huge room for growth in China's consumption," Bai Ming, a researcher and member of the Academic Degrees Committee of the Ministry of Commerce Research Institute, pointed out, but if consumption growth slows down further in the future, it will have a big drag on the mainland's economic growth.
Bai Ming believes that it is no longer possible to stimulate consumption growth by relying only on sporadic and isolated policies, and that consumption policies must be systematic and comprehensive, which inevitably includes an increase in income, more competitive products, more convenient trading channels, and more law-based supervision.
Regarding the current problems related to consumption in economic operation, Jin Xiandong, director of the Policy Research Office of the National Development and Reform Commission, said at a press conference on April 17 that in the future, the National Development and Reform Commission will coordinate various departments and localities to focus on consumption growth from three aspects.
Among them, the primary task is to stabilize employment and increase income, and earnestly improve residents' consumption capacity. In addition, it will also focus on expanding demand and optimizing supply, continue to create new growth points for consumption, and strive to create a safe consumption environment by respecting rights and interests and keeping the bottom line.
In terms of increasing income, many provinces have raised the minimum wage standard this year, and at least 20 provinces have a minimum wage standard higher than 2,000 yuan. In addition, Heilongjiang, Xinjiang, Jilin, Inner Mongolia and other provinces where the minimum wage standard is only a foot away from 2,000 yuan are also expected to be raised this year.
Earlier, the relevant central departments defined 2024 as the "Year of Consumption Promotion", and a series of policies to expand domestic demand are being intensively introduced. The high-profile real estate sector has also ushered in blockbuster favorable policies such as "trade-in" and real estate financing coordination mechanism.
Wu Chaoming believes that with the gradual smoothing of the economic cycle to drive the recovery of residents' income, the policy of stabilizing private enterprises to promote consumption, and the demand for service consumption to continue to recover support, it is expected that the annual consumption is expected to rebound moderately to 5-6%.
Bai Ming believes that due to the high base and other factors, the social zero data in the second quarter of this year may fall again, but with the implementation of a series of comprehensive favorable policies, consumption will maintain a relatively stable growth trend throughout the year.