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Reporter Xin Yuan

The National Bureau of Statistics released data on Thursday showing1-7In July, the national fixed asset investment increased by 3.6% year-on-year, a decrease of 0.3 percentage points from the previous six months. In July, the total retail sales of consumer goods increased by 2.7% year-on-year, an increase of 0.7 percentage points from the previous month, and the added value of industrial enterprises above designated size increased by 5.1%, a decrease of 0.2 percentage points from the previous month.

Among the major economic data, investment and consumption were lower than expected, while industrial production was in line with expectations. Before the data was released, the median forecast of seven institutions collected by Jiemian News showed that1-7In July, fixed asset investment increased by 3.8% year-on-year. In July, total retail sales of consumer goods increased by 3.0% year-on-year, and industrial added value increased by 5.1%.

Analysts said that overall, the characteristics of insufficient domestic demand remained prominent in July. At the same time, affected by the weather, the pace of production slowed down, and the endogenous momentum of the domestic economy still needs to be improved.

"The official manufacturing Purchasing Managers' Index (PMI) fell to 49.4% in July, and has been in the contraction range for three consecutive months. The prosperity of the construction and service industries also dropped to a low level. This shows that the momentum of economic growth tends to slow down, among which residents' consumption and private investment are still relatively weak links." Wang Qing, chief macro analyst of Orient Securities International Credit Rating Co., Ltd., told Interface News.

He said that in the second half of the year, against the backdrop of the possible weakening of external demand to economic growth, the key to stabilizing growth is to effectively boost domestic demand. It is necessary for policies to support the development of new quality productivity while making greater efforts to address the problem of the declining property market - this is the root cause of insufficient effective domestic demand.

The National Bureau of Statistics said in a press release:In July, the economy was generally stable, making steady progress, and high-quality development was steadily promoted. However, we should also see that the adverse effects of the current changes in the external environment have increased, domestic effective demand is still insufficient, there are pains in the transition from old to new drivers, and the continued recovery of the economy still faces many difficulties and challenges. In the next stage, we must increase the intensity of macroeconomic regulation, implement various policy measures in detail, and consolidate the foundation for the continued recovery of the economy.

Infrastructure investment has fallen for four consecutive years

From January to July, infrastructure investment excluding electricity increased by 4.9% year-on-year, a drop of 0.5 percentage points from the previous six months, marking the fourth consecutive month of slowdown.

Analysts pointed out that the growth rate of infrastructure investment has slowed down, on the one hand because the pace of issuance of new special bonds by local governments has been slow since the beginning of this year, and on the other hand, the rain and flood disasters in the south this summer have had a certain impact on the construction of infrastructure projects.

According to statistics from Zheshang Securities, as of July 30, the issuance of new local special bonds this year amounted to 1.77 trillion yuan, accounting for 46% of the annual issuance plan of 3.9 trillion yuan formulated by the National People's Congress and the Chinese People's Political Consultative Conference at the beginning of the year. The issuance progress of special bonds in the first seven months of the past five years was close to 66%.

In addition to the special bond factor, Xu Tianchen, a senior analyst at the Economist Intelligence Unit, pointed out that the slowdown in infrastructure investment growth since the second quarter was related to factors such as stricter project review and a lack of suitable projects.

Wang Qing said that the Politburo meeting at the end of July required that macroeconomic policies in the second half of the year "continue to be more powerful", and put forward specific requirements such as "accelerating the issuance and use of special bonds, making good use of ultra-long-term special government bonds, and supporting the construction of security capabilities in major national strategies and key areas." This means that the third quarter will usher in a peak in government bond issuance, and the growth rate of infrastructure investment may pick up slightly after August.

Manufacturing investment remains resilient

From January to July, manufacturing investment increased by 9.3% year-on-year, a drop of 0.2 percentage points from the previous six months, marking the fourth consecutive month of decline.

Wen Bin, chief economist of China Minsheng Bank, pointed out in a research report that the production and operation activity expectation index in the manufacturing PMI in July fell to the lowest level since the beginning of 2023, indicating that companies' willingness to invest has weakened. Coupled with the low production and sales rate and capacity utilization rate, the growth rate of manufacturing investment has slowed down.

However, the current growth rate of manufacturing investment remains at a high level. Analysts believe that this is largely due to policy support for the transformation and upgrading of the manufacturing industry, among which large-scale equipment upgrades are an important driving factor.

On July 25, the National Development and Reform Commission and the Ministry of Finance issued "Several Measures on Further Supporting Large-Scale Equipment Renewals and Trade-ins of Consumer Goods", which coordinated the allocation of about 300 billion yuan of ultra-long-term special treasury bonds. Among them, the National Development and Reform Commission took the lead in arranging about 148 billion yuan of ultra-long-term special treasury bonds for large-scale equipment renewal special funds, which will be used to support the optimization of equipment renewal projects and support the scrapping and renewal of old operating ships.

"A considerable part of manufacturing investment comes from equipment investment, reflecting the logic of equipment renewal and industrial upgrading. Driven by a slight recovery in manufacturing profits and the expansion of equipment renewal policies, manufacturing investment is expected to remain at a high level this year," said Xu Tianchen.

Wu Chaoming, deputy director of Caixin Research Institute, also said that the policy-level support for large-scale equipment upgrades will provide strong support for upstream raw materials and midstream equipment manufacturing investments. In addition, the resonance of China and the United States in replenishing inventories and the recovery of corporate profits will also be beneficial to manufacturing investment.

Real estate investment continues to decline

From January to July, national real estate development investment fell by 10.2% year-on-year, with the decline widening by 0.1 percentage point from the previous six months.

Specifically, in the first seven months of this year, the construction area of ​​houses by real estate developers decreased by 12.1% year-on-year, an increase of 0.1 percentage point from January to June; the area of ​​newly started houses decreased by 23.2%, a decrease of 0.5 percentage point compared with the first half of the year.

Wang Qing said that recent policies have not shown any signs of strong stimulus to the real estate industry in the second half of the year. It is estimated that real estate policies will continue to adjust gradually. After the pulsed release of rigid demand in first-tier and key second-tier cities, the housing market will return to a low-level operation in the third quarter.

Xu Tianchen also said that the policies that have been introduced are not enough to offset the current downward pressure on the real estate industry, whether in terms of incentive mechanisms or financial support, so real estate development investment will continue to show negative growth.

In a report last month, the Institute of Finance of the Chinese Academy of Social Sciences called for increasing efforts to rescue the real estate market as soon as possible to avoid "squeezing toothpaste"-style policy relaxation. On the demand side, first-tier cities should cancel the purchase and loan restrictions as soon as possible to promote the entry of existing demand into the market as soon as possible. At the same time, issue ultra-long-term special government bonds for the government to purchase commercial housing and build affordable housing to ease local fiscal pressure.

However, Xu Tianchen believes that the current policy orientation is dominated by preventing financial risks, rather than deliberately seeking to reverse the downward trend in real estate, and the tolerance for negative growth in real estate investment may be relatively high.

Consumption has picked up

Residents' travel demand during the summer vacation was strong, and the base of the same period last year was low, so the year-on-year growth rate of total retail sales of consumer goods in July accelerated. In July last year, the total retail sales of consumer goods increased by 2.5% year-on-year.

Zhang Wenlang, chief macro analyst at CICC Research Department, said in a report that July is the peak season for summer travel, and the national migration scale index and the number of domestic flights have increased significantly month-on-month, and are roughly the same as last year. In addition, the lower base of the same period last year will also provide some support for the growth rate of total retail sales.

By consumption type, in July, retail sales of goods increased by 2.7% year-on-year, 1.2 percentage points faster than the previous month, but catering revenue increased by 3.0% year-on-year, 2.4 percentage points lower than the previous month.

Among the commodities above the quota, communication equipment and sports and entertainment products showed the highest year-on-year growth, up 12.7% and 10.7% respectively. Gold and silver jewelry and clothing, shoes, hats and textiles performed the worst, down 10.4% and 5.2% respectively.

The National Development and Reform Commission and the Ministry of Finance issued the "Several Measures on Further Supporting Large-Scale Equipment Renewals and Trade-ins for Consumer Goods", proposing to arrange 150 billion yuan of ultra-long-term special government bonds to support local governments in independently implementing trade-ins for consumer goods, and the scope and intensity of subsidies have been increased.

Wang Qing said that increasing subsidies may have a certain boosting effect on commodity consumption in the later period, but the root cause of weak consumption is the slowdown in the growth of residents' income, which has led to a decline in consumer confidence.

"According to the latest data from the National Bureau of Statistics, the consumer confidence index was 86.2 in June, down 0.2 from the previous month, and has been declining for three consecutive months, significantly below the median level of 100. In addition, the growth rate of urban residents' income further declined in the second quarter, which will also have a certain adverse impact on residents' consumption in the short term," said Wang Qing.

Industrial production momentum slows down

As of July, the growth rate of industrial value added above designated size has slowed down for three consecutive months, with the main reason behind this being insufficient market demand.

The National Economic Research Center of Peking University pointed out in the report that the current industrial economy as a whole is in a stage of stable growth, but due to the continued insufficient domestic effective demand, the marginal decline in the manufacturing industry's business climate and the high base last year, the momentum of industrial production has declined slightly.

From the perspective of forward-looking indicators, the production index in the manufacturing PMI fell 0.5 percentage points to 50.1% in July, and the new order index fell 0.2 percentage points to 49.3%, both of which were the lowest since March.

Wu Chaoming said that although the domestic new momentum is accelerating, the real estate market is still in a period of deep adjustment, which has led to cautious behavior of micro-entities. At the same time, overseas uncertainties have increased significantly since the second half of the year, which will further reduce the willingness of enterprises to produce. Overall, the subsequent industrial production momentum may be stable but slightly reduced.

Xu Tianchen also said that the impact of external demand uncertainty on industrial production will increase. "The inventory replenishment of developed economies may have come to an end. Except for some industries such as chips and electronics, which are still in an upward cycle, the demand of most other industries is peaking and falling. In addition, factors such as rising overseas protectionism and increased tariffs may stimulate "export rush" in the short term, but in the medium and long term, it will lead to a decline in my country's exports to relevant countries." He said.