Macroeconomic data from January to July: Growth momentum continues to weaken, and incremental policies are expected
2024-08-16
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(The author of this article is Wu Chaoming, deputy director of Caixin Securities Research Institute)
Affected by extreme weather disturbances, insufficient domestic effective demand, and the pain of the conversion of new and old growth drivers, most of the main supply and demand indicators fell in July, and the short-term downward pressure on the economy increased. Specifically, the marginal slowdown of the main driving forces in the early stage, such as industrial production, manufacturing investment, and exports, continued to bottom out in weak links of the economy, such as real estate and private investment, and consumption rebounded slightly but the momentum was weak. It is expected that the implementation of the spirit of the "7.30" Political Bureau meeting will be accelerated in the future, and macroeconomic policies are expected to "continue to work hard and be more powerful", and the probability of the introduction of incremental policies will increase, so as to unswervingly achieve the annual GDP growth target of about 5%.
>>Industrial value added: continued to maintain a stable but slightly declining trend, with equipment manufacturing industry playing an obvious supporting role.In July, the added value of industrial enterprises above designated size increased by 5.1% year-on-year, maintaining a relatively fast growth, but fell by 0.2 percentage points from the previous month, slowing down slightly for three consecutive months. There are three reasons: First, the continued weakening of the demand side and the prominent contradiction between "strong supply and weak demand" in the economy have formed a major drag on industrial production; second, the recent continuous extreme heavy rainfall and high temperature weather have restricted outdoor industrial production activities, which is also an important reason for its slowdown; third, the new momentum continues to play the role of "ballast stone" and is the source of power for industrial production to maintain resilience. For example, the growth rate of equipment manufacturing industry production in July was 2.2 percentage points higher than that of all industrial enterprises above designated size, contributing nearly 50% of the growth rate of all industrial added value above designated size. Looking forward, the policy of strengthening growth and accelerating the development of new momentum are expected to continue to support industrial production, but due to the constraints such as the increase in the base number and the difficulty in changing the "strong supply and weak demand" pattern in the short term, it is expected that the growth rate of industrial added value will maintain a "slightly declining" trend.
>>GDP（GDP): It is expected to grow by approximately 5.0% in 2024.The economy showed the following five characteristics in July: First, the supply is strong and the demand is weak, and the low inflation pattern remains unchanged; second, the recovery of external demand is better than that of domestic demand, and the necessity of stabilizing domestic demand has increased significantly; third, the differentiation of domestic demand is prominent, and real estate continues to drag down the recovery of demand; fourth, the recovery of necessities in consumption is better than that of non-necessities, and residents' income should be increased through multiple channels to improve their consumption capacity; fifth, the development of new quality productivity is accelerated, and the transformation of new and old kinetic energy is accelerated. It is expected that the economy will recover as a whole in 2024, with GDP growth of about 4.8% and 5.2% in the third and fourth quarters respectively, and an annual growth of about 5.0%.
>>Consumption: A slight recovery but with weak momentum, full-year retail sales are expected to grow by 4-5%.In July, the total retail sales of consumer goods increased by 2.7% year-on-year, 0.7 percentage points higher than the previous month. Specifically, it presents four major characteristics: First, the decline in the base is an important supporting factor for the recovery of the growth rate of social retail sales; second, benefiting from the summer tourism peak season and the effective old-for-new policy, the consumption of upgraded products such as sports and entertainment, communication equipment, etc. has rebounded significantly, and the decline in major consumption such as automobiles and home appliances has narrowed, supporting the return of the growth rate of retail sales of goods above the quota; third, the consumption of low- and middle-income groups has continued to recover, and the retail sales of goods below the quota have increased significantly and the supporting role has been enhanced; fourth, due to the drag of the high base, the growth rate of catering income has fallen significantly. Looking forward, as the policy focuses on promoting consumption and increasing efforts to stabilize growth, consumption is expected to continue to recover, but due to the double impact of the sluggish "employment-income-consumption" cycle and the shrinking of stock wealth, it is expected that the improvement of residents' consumption capacity and willingness will be weak and slow, and the annual social retail sales are expected to grow by about 4-5%.
>> Investment: The service industry was a significant drag and the growth rate continued to decline.From January to July, the year-on-year growth rate of fixed asset investment slowed down by 0.3 percentage points from the previous value, and the month-on-month growth rate turned from positive to negative. The growth momentum of investment weakened, and the extreme heavy rainfall and high temperature weather disturbed the construction. In terms of structure, the growth rate of major investments showed the differentiated characteristics of "manufacturing fell from a high level, broad infrastructure support strengthened, real estate continued to grow negatively, and other investments fell". The service industries such as culture, sports, entertainment, and education were the main drags on the decline in the growth rate of all investments.
First, affected by the high base effect in the previous period, the midstream equipment manufacturing industry dragged down the overall manufacturing investment growth rate, but the demand for equipment renewal supported the recovery of the upstream raw material investment growth rate, and the cumulative growth rate of manufacturing investment remained at a high level of 9.3%; it is expected that manufacturing investment will continue to maintain strong resilience in the future, with the annual center at around 8-9%. Second, fiscal funds and large projects support the continued recovery of the growth rate of broad infrastructure investment, but the growth rate of new infrastructure such as information has fallen, and the growth rate of infrastructure investment in the caliber of the Statistics Bureau continues to decline; it is expected that the infrastructure funding side will still be guaranteed in the future, but the diversion of bond funds and the constraints of debt reduction are difficult to change, and the growth rate of broad infrastructure investment may fall back to around 7% throughout the year. Third, the real estate market is still in the bottoming period after deep adjustment, and the effect of previous policies is limited. With the help of low base and policies, the decline in the growth rate of indicators such as sales area and sources of funds in July narrowed slightly, but the decline in the growth rate of development investment widened by 0.1 percentage point to -10.2%. At the same time, the price growth rate has been negative for 14 consecutive months, and the price decline has not been exchanged for an increase in volume. The overall real estate market is in a deep adjustment and bottoming stage.
>> Domestic policy outlook: Continue to exert more efforts. In terms of finance,It is expected that the issuance and use of special bonds will accelerate, and the investment areas will be expected to expand; the focus of ultra-long-term special treasury bonds is to "use them well", and funds for the two new and two heavy areas are expected to be landed faster; in addition, increasing the deficit ratio and issuing more treasury bonds may be important reserve increase policies.In terms of currency,It is expected that the probability of the central bank continuing to cut interest rates and reserve requirement ratio will increase, and structural tools are expected to become more powerful; among them, the central bank's interest rate policy operation may be "lowering short and stabilizing long", that is, while lowering interest rates to stabilize growth, selling long-term government bonds to maintain long-term interest rates relatively stable, prevent the accumulation of risks in the bond market, and take into account both stabilizing growth and preventing risks.
This article only reflects the author’s views.
