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Haitong Macro Liang Zhonghua team
Authors of this report:
李林芷 S0850121060038
梁中华 S0850520120001
·Summary · In April, the economy showed a trend of structural differentiation between domestic and foreign demand. On the one hand, exports and related industries performed strongly. On the other hand, in addition to the effective implementation of policies and the improvement of real estate production, other domestic demand, such as consumption of goods and services, manufacturing and infrastructure investment, is relatively flat. In the next stage, external demand may be relatively stable, which will support the economy to a certain extent, and whether domestic demand can improve depends on the strength of policies. At present, various policies to stabilize growth will continue to be implemented, such as equipment renewal, durable goods trade-in policy promotion, local purchase restrictions relaxation, etc., durable goods consumption, real estate investment and other economic indicators can be improved, it remains to be further observed. The short-term difficulties encountered in the process of further economic recovery and improvement will not change the fundamentals of long-term improvement.
Risk warning: external demand has fallen, and the policy is less than expected.
1
Economy in April: Divergence continues
In April, the economy showed a trend of structural differentiation between domestic and foreign demand. On the one hand, exports and related industries performed strongly. The year-on-year growth rate of exports in April was 1.5%, and the annualized growth rate was 4.3%, which was significantly better than that in March, and the seasonally adjusted month-on-month was also positive. Export-led, production remains strong in related industries, such as automobiles, electronic equipment, transportation equipment, etc.
On the other hand, except for the sectors where the policy has been effective, the performance of other domestic demand is relatively flat. The high base and the difference in the number of holiday days have led to a slowdown in consumption growth; Manufacturing investment is dragged down by the contraction of profits, infrastructure investment is facing the problem of insufficient funds in place, and the construction progress is slow; The production of building materials, steel, kerosene and other industries based on domestic demand is also relatively weak. It is worth noting that the current real estate policy continues to be optimized, and the real estate financing coordination mechanism has been rapidly implemented in various parts of China, which has led to a significant improvement in the real estate production side, but its duration is relatively short, and it has not been able to promote the recovery of real estate investment.
In the next stage, external demand may be relatively stable, which will support the economy to a certain extent, and whether domestic demand can improve depends on the strength of policies. At present, various policies to stabilize growth will continue to be implemented, such as equipment renewal, durable goods trade-in policy promotion, local purchase restrictions relaxation, etc., durable goods consumption, real estate investment and other economic indicators can be improved, it remains to be further observed. The short-term difficulties encountered in the process of further economic recovery and improvement will not change the fundamentals of long-term improvement.
2
Production: driven by external demand
Production growth picked up. Industrial production grew by 6.7% year-on-year in April, up from 4.5% in the previous month. From a seasonally adjusted month-on-month perspective, industrial added value increased by 0.97% month-on-month in April, the highest value since 2012 except for 2020, and production growth was ultra-seasonal.
Exports are the main support for production, and the differentiation between domestic and foreign demand has intensified. In April, the year-on-year growth rate of the production and sales rate of industrial enterprises was -0.1%, and the year-on-year growth rate of export delivery value was 7.3%, both higher than the March reading, but the export delivery value improved significantly, reflecting that the current export is still the main destination of finished products. According to the proportion of exports in the input-output table, we divide the industrial sector into external demand and domestic demand, and we can find that the average labor growth rate of the external demand industry rebounded from 2.5% in March to 4.2%, but the average labor growth rate of the domestic demand group is still falling, from 3.4% in March to 2.1%. This shows that the current differentiation between domestic and foreign demand is further intensifying.
Specifically, there is a clear differentiation between external demand and domestic demand, the new economy and traditional industries. From the perspective of industrial added value, the growth rate of automobiles, electronic equipment, transportation equipment and other industries is in the front, and the production growth rate of rubber and plastic products, textiles and metal products industries is also rising rapidly, and most of the low growth rates are domestic demand industries, such as agricultural and sideline food, real estate-related building materials, steel, and coal mining and oil and gas mining in upstream industries. In terms of output, the output of export-led industrial products such as new energy vehicles, integrated circuits, industrial robots, SUVs and automobiles maintained a high year-on-year growth, followed by solar energy, hydropower and other new energy power production growth rates were also high. On the whole, the differentiation in the industry is more obvious, with the external demand industry being better than the domestic demand industry, and the new economy-related industry being better than the traditional economy industry.
The production of the service industry was affected by the high base, and the growth rate declined. The services production index rose 3.5% year-on-year in April, falling for the second consecutive month, mainly due to a high base in the same period last year. In addition, the Qingming Festival holiday in April is relatively short, and residents may choose to postpone more long-distance travel to the May Day holiday, so the contribution of the holiday economy to service production in April is relatively limited. From the May Day data released so far, it can be seen that the holiday effect is more obvious, residents' travel, tourism and service consumption data have all risen, and the superimposed base is lower, or a slight marginal improvement in the service industry data in May can be expected.
The unemployment rate falls seasonally. The surveyed urban unemployment rate in April and the surveyed urban unemployment rate in 31 major cities were both 5.0%, down 0.2 and 0.1 percentage points respectively from March. This is mainly due to seasonal factors, except for 2020 and 2022, the unemployment rate in April has decreased to varying degrees compared with March.
3
Consumption: Growth slows down from a high base
The decline in service consumption led to a slowdown in overall consumption growth. In April, the total retail sales of consumer goods increased by 2.3% year-on-year, of which the zero retail sales of social goods above designated size increased by 0.9% year-on-year, and the growth rate fell by 0.8 and 1.7 percentage points respectively from March. From a seasonally adjusted month-on-month perspective, the month-on-month growth rate in April was 0.03%, slower than the previous month's growth rate, and significantly lower than the level in 2019 and before. According to the National Bureau of Statistics, retail sales of services increased by 8.4% year-on-year from January to April, down from 10.0% in the first quarter. The consumption data in April was relatively flat, mainly due to the impact of the high base in the same period last year, and the number of holiday days decreased by 2 days compared with April last year, which had a certain impact on consumption.
From the perspective of sub-items, online consumption improved marginally, while other categories all fell marginally. The year-on-year growth rates of retail sales and catering revenue in April were 2.0% and 4.4% respectively, down from 2.7% and 6.9% in March, mainly due to the impact of a high base. Online sales grew at a year-on-year rate of 8.9% in the month, up from 7.4% in March, the only marginal improvement among all types of consumption.
Compared with specific industries, the main lines of service consumption and upgraded consumption are still dominant. The consumption of communication equipment in the consumption upgrade category maintained the highest growth rate, and there was a significant increase compared with March, which was mainly due to the large number of new machines and new products released in April and the rich categories. Other categories with a large rebound in growth include medicine, cultural office, etc., or due to the increase in seasonal demand. The holiday effect is weak, and the growth rate of consumption related to sports and entertainment, grain, oil and food, tobacco and alcohol has dropped slightly. The performance of building materials and automobile consumption is still weak, with the lowest growth rate among all consumer goods, the former due to the overall sluggish performance of real estate, and the latter due to the current subsidy policy has not been fully implemented.
4
Investment: Marginal weakening
Investment growth has slowed down. From January to April, the cumulative year-on-year growth rate of fixed asset investment was 4.2%, a slight decrease from 4.5% in the first quarter; Among them, the year-on-year growth rate of fixed asset investment in April was 3.5%, lower than the 4.8% in March. From a seasonally adjusted month-on-month perspective, the month-on-month growth rate in April was -0.03%, turning negative again.
All investments weakened at the margin. In April, the cumulative year-on-year growth rates of real estate, manufacturing and broad infrastructure investment were -10.5%, 9.3% and 6.0% respectively, and the growth rate of various investments fell to varying degrees, of which the largest decline was in broad infrastructure investment. It is worth noting that the year-on-year growth rate of private investment in April was -0.2%, which was the first year-on-year negative since October 2021.
Corporate earnings contraction, dragging down manufacturing investment. Although exports still have some support for manufacturing investment, due to the lack of improvement in domestic demand and the rise in raw material prices, the profits of industrial enterprises fell by 3.5% year-on-year in March, the first negative year-on-year growth since August last year. The narrowing of corporate profit margins has weakened their willingness to expand production and investment compared with the previous period, which is also the main reason for the slight decline in the growth rate of manufacturing investment in April.
The slow arrival of funds has dragged down infrastructure investment. From January to April this year, the cumulative issuance of new special bonds was 722.5 billion yuan, which was lower than that of other years except 2021. Judging from the operating rate of petroleum asphalt plants, which reflects the progress of infrastructure construction, the year-on-year decline in April was 28.1%, and the construction progress was relatively slow.
From a fundamental point of view, there has been a significant improvement on the production side. On the demand side, the cumulative year-on-year growth rate of commercial housing sales area and sales in April was -22.8% and -30.4% respectively, and the decline was wider than that of 18.3% and 25.9% in March. On the production side, the cumulative growth rates of new construction, construction and completed areas in April were 19.4%, -14.2% and -19.1% respectively, all higher than the level in March. Among them, the year-on-year growth rate of construction area has turned from negative to positive, and the improvement is large. As of March 31, 1,979 of the "white list" projects pushed by various places have received a total of 469.03 billion yuan of bank credit, and 1,247 projects have received loans of 155.41 billion yuan. This batch of funds helps to ensure the normal development and construction of real estate projects and prevent problems such as shutdown and overdue, which may be the main reason for the obvious acceleration of the current real estate production end.
Risk warning: external demand has fallen, and the policy is less than expected.
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Rising to the Challenge: Haitong's Macroeconomic and Policy Outlook in 2024 (Haitong Macro Research Team)
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