Author | Political Commissar Lu, Guo Yuwei, Jiang Dongying, Cheng Zilong, Song Yanchen, Cai Qisheng, Zhang Lihan
Economic forecasting
Key macro data for May 2024 will be released around June 10, 2024. Here, we look ahead to the relevant macro data and use this as a basis for our assessment of the policy situation in June 2024.
Digital landscape: Currencies are slowing and exports are picking up. In terms of growth, under the low base and the effect of "rushing to export", exports in May are expected to further accelerate year-on-year; The "May Day" dislocation boosted the May zero reading; Investment in fixed assets may continue to diverge. In terms of prices, the rebound in pig prices led to a slight year-on-year increase in CPI in May; Driven by the tail factor, the year-on-year decline in PPI is expected to narrow significantly. In terms of financing, the "move" of deposits to the non-bank system continues, and the growth rate of money may continue to slow down; Credit demand was not strong in May, but the net financing of government bonds exceeded one trillion yuan, and the reading of new social finance is expected to improve significantly.
Sentiment expectation: Enter the observation period of policy effect. In May, various localities intensively introduced measures to optimize real estate policies. June will enter the observation period of policy effects, and the market will shift from trading policy expectations to trading results.
Policy expectations: the interaction and balance of volume and price targets. Although deposits may continue to "move" in June, the decline in NCD interest rates is slower than that of credit bonds, which is still attractive to investors, and the maturity of government bonds in June exceeded one trillion yuan, supporting abundant liquidity. The reduction of arbitrage after the cessation of "manual interest payment" may affect credit growth, and in the future, it is an important means to stimulate financing demand or stabilize credit growth by reducing financing costs.
Industrial added value year-on-year: 5.5%, down 1.2 percentage points from the previous month
In May 2024, the operating rates of major industrial products diverged. Under the combined effect of supply disruption and improved demand expectations, the profit of rebar rebounded slightly, and the crude steel output also increased slightly in a stable manner. After May Day, the tire operating rate rebounded to a high level again, and the trend of semi-steel tires being better than all-steel tires continued; The operating rate of the PTA industry chain as a whole is still at a high level, but it is slightly lower than that in April; The daily consumption of coal turned from positive to negative year-on-year; Real estate data remains weak. Taking into account the base of last year, the industrial added value in May decreased by 1.2 percentage points year-on-year or from the previous month.
Exports increased by 6.5 percentage points year-on-year
Imports year-on-year: 2.5%, down 5.9 percentage points from the previous month
In terms of exports, under the low base effect and the disturbance of trade frictions, exports in May may rebound year-on-year. In terms of base effect, exports fell by 2.5% month-on-month in May 2023, the first month-on-month decline since the same period in 2013. From the perspective of trade friction disturbances, on May 14, 2024, the United States released the results of the four-year review of the additional 301 tariffs on China, announcing that on the basis of retaining the original 301 tariffs on China, it will further increase the tariffs on electric vehicles, lithium batteries, photovoltaic cells, critical minerals, semiconductors, steel and aluminum, port cranes, personal protective equipment and other products imported from China. Among them, tariffs on electric vehicles and their batteries, semiconductors and medical products will come into effect on August 1, 2024. Affected by this, enterprises may "rush to export" before the official landing of tariffs. Combined with the shipping index, the export container freight index in May rebounded by 169.5 points from the previous month to 1358.7 points, the highest value since December 2022, indicating that the export enthusiasm in May will not decrease.
In terms of imports, the decline in the manufacturing industry and the increase in the base of the superposition, imports in April may fall year-on-year. From the perspective of domestic demand, the manufacturing PMI in May fell by 0.9 percentage points from the previous month to 49.5%, and the manufacturing boom fell below the boom and bust line or dragged down import demand. The import index in May fell by 1.3 percentage points from the previous month to 46.8%, reflecting the month-on-month decline in import demand. In terms of base effect, imports increased by 6.3% month-on-month in May 2023, the highest value since the same period in 2018. However, commodity prices rebounded in May, with the CRB spot index rising 0.2% year-on-year, the first positive growth since October 2022, which could support the import reading on the price side.
Investment in fixed assets increased by 4.2% year-on-year, unchanged from the previous month
The cumulative investment in fixed assets in May is expected to record 4.2% year-on-year. In terms of infrastructure investment, the issuance of local government bonds accelerated significantly in the last week of May, and the year-on-year decline in the operating rate of petroleum asphalt and cement shipment rate narrowed slightly, reflecting that the physical workload of infrastructure construction may improve in May. In terms of real estate investment, the significant rebound in housing construction data in April may indicate that the real estate financing coordination mechanism and other policies to ensure the delivery of buildings are gradually taking effect, and the transaction of construction steel and the rate of housing construction funds in May have increased, which also shows that there are a certain degree of positive signals in housing construction activities. However, new home sales in May are still hovering at a low level, and the year-on-year decline in land transaction area has further expanded. In terms of manufacturing investment, the rebound in the profitability of industrial enterprises in April supported the growth of enterprise investment, while the construction of major projects and the renewal of enterprise equipment also continued to provide momentum for manufacturing investment, and manufacturing investment is expected to maintain a high growth rate in May.
Retail sales of consumer goods increased by 0.9 percentage points year-on-year, up 3.2% year-on-year
The staggered effect of the "May Day" holiday pulled up the year-on-year reading of catering revenue, which supported the social zero in May.
In terms of catering revenue, data from the Ministry of Culture and Tourism shows that a total of 295 million domestic tourism trips were made during this year's "May Day" holiday, an increase of 28.2% over the same period in 2019 on a comparable basis; The total travel expenditure of domestic tourists was 166.89 billion yuan, an increase of 13.5% over the same period in 2019 on a comparable basis. In 2023, 2 days of the "May Day" holiday fall in April, while this year's "May Day" holiday falls in May. In terms of movie box office, the average daily box office in May was equivalent to about 84% of the same period in 2019, a significant rebound from the 48% level in April, which also had a certain impact on catering.
In terms of retail sales, online shopping showed resilience, while automobiles remained a drag. On April 26, the Ministry of Commerce, the Ministry of Finance and other seven departments jointly issued the "Implementation Rules for Automobile Trade-in Subsidy"; Due to the long process of scrapping old cars, it may take time for the new policy to boost the auto market. The Federation of Passenger Car Cars predicts that the retail sales of passenger cars in May may record a year-on-year increase of -5.3%, which is still a drag on commodity retail. The "618" shopping festival of various e-commerce companies has been opened one after another, and the year-on-year growth rate of postal express collection and delivery volume in May recorded 28.3% and 24.4% respectively, and online shopping has constituted a certain support for social zero.
PPI year-on-year: -1.6%, up 0.9 percentage points from the previous month
CPI year-on-year: 0.5%, up 0.2 percentage points from the previous month
In terms of industrial products, the prices of industrial products in May were quite differentiated. Crude oil prices were -6.8% month-on-month in May, as the easing of geopolitical events and the seasonal downturn in refining demand prompted a pullback in crude oil prices. The black trading policy is expected to be 2.6%, 5.9% and 3.1% month-on-month for thread, iron ore and coke. Non-ferrous metal prices continued to rebound, with copper and aluminum rising by 6.8% and 1.7% month-on-month. Overall, the PPI is expected to come in at -1.6% year-on-year in May.
In terms of consumer goods, the prices of major consumer goods were generally stable in May. Pig prices rebounded slightly, but piglet prices continued to rise, with live pigs 0.9% month-on-month in May; Fresh vegetable prices continued to decline seasonally as warmer temperatures continued to decline, -2.8% month-on-month. Gasoline prices fell along with international oil prices, -2.7% month-on-month. Overall, the CPI reading continues to run smoothly at a low level, and the CPI is expected to record 0.5% year-on-year in May.
New RMB loans: 1.25 trillion yuan, an increase of 0.52 trillion yuan from the previous month
The scale of new social finance: 2.53 trillion yuan, an increase of 2.60 trillion yuan from the previous month
On the credit front, credit growth is expected to slow further in May from the previous month. From the perspective of residential loans, the weak demand for housing continues to suppress the demand for residential loans, and the weighted area of first- and second-hand housing transactions estimated by us in May recorded a year-on-year increase of -28.1%, an increase of 0.4 percentage points from the previous month. From the perspective of corporate loans, on the one hand, the construction industry started in May compared with April but was still weak, with the average cement shipment rate in May at 40.8%, up 1.8 percentage points from 39.0% in April, but lower than 46.4% in May 2023, or indicating that the financing demand related to construction activities is still weak; On the other hand, after the cessation of "manual interest supplementation", some arbitrage financing activities will also be reduced under the compression of arbitrage channels. On the whole, the scale of new loans in May is expected to be 1.25 trillion yuan, and the corresponding year-on-year growth rate of loans is 9.5%.
In terms of social finance, the growth rate of social finance may rebound slightly in May, supported by government bonds. From the perspective of government bonds, the issuance of local bonds accelerated in the last week of May, and the net financing scale of government bonds this month is expected to exceed one trillion yuan. Combined with the scale of credit, the new social finance in May is expected to be 2.53 trillion yuan, and the corresponding year-on-year growth rate of social finance is 8.6%.
M1: -1.9%, down 0.5 percentage points from the previous month
M2: 6.7%, down 0.5 percentage points from the previous month
In terms of M1, weak new home sales continued to drag down M1, and as of May 28, the transaction area of commercial housing in 30 large and medium-sized cities in May recorded -43.1% year-on-year. At the same time, the impact of the suspension of "manual interest supplement" is still fermenting, and some demand deposits may continue to be transferred to the non-bank system. It is expected that M1 will fall from the previous month and continue to run at a low level.
In terms of M2, judging from the financial data in April, the scale of M2 in April increased by 3.0 trillion yuan year-on-year, and the scale of M1 increased by 1.7 trillion yuan year-on-year, reflecting that the impact of "manual interest supplement" exceeds the scope of corporate demand deposits, and the phenomenon of deposits "moving" to the non-bank system will continue, putting pressure on M2. Combined with seasonal factors, M2 is expected to continue to decline year-on-year in May.
DR007 in June: 1.87%, an increase of 2bp from the previous month
6月股份行NCD 3M：1.90%，较上月下降3bp
In June, the capital situation may be generally stable. In response to the impact of the "relocation" of deposits, the net financing scale of NCD rose to 712.47 billion yuan in May, but the non-bank liquidity is abundant and the RMB swap point continues to be low, the NCD allocation power is still there, and the NCD interest rate shows the characteristics of low fluctuations.
Since the last week of May, local government bonds have started to accelerate, but the maturity of government bonds in June reached about 1.2 trillion yuan, mitigating the impact of the acceleration of government bond issuance on liquidity. Considering that the interest rate of the agreement deposit is settled quarterly, the phenomenon of deposit "moving" may continue in June, but compared with credit bonds, the NCD interest rate is slower to decline, which is attractive to investors, so the NCD interest rate may continue to fluctuate at a low level in June. Constrained by external factors, the DR007 pivot has stabilized at a level slightly higher than the 7-day reverse repo rate since 2024, and it is expected that the DR007 pivot will continue to be slightly higher than the 7-day reverse repo rate in June.
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