Outbreaks in many places have disturbed the production chain of enterprises. In March, the added value of industries above Designated Size actually increased by 5.0% year-on-year, 2.5 percentage points slower than that from January to February. The epidemic prevention and control disturbed the production and logistics transportation of enterprises. Enterprises in relevant regions began to reduce production and stop production, and affected the production activities of the whole country upstream and downstream along the industrial chain. Judging from the decline of year-on-year growth rate, the damage of automobile manufacturing industry is more serious. Both Shanghai and Jilin are important automobile and auto parts production bases in China. According to the data of the Bureau of statistics, Shanghai and Jilin Province account for about 11% of the national production respectively. General equipment manufacturing and electrical machinery manufacturing are also affected by the supply chain.
The epidemic has restrained consumption and zero negative social growth. In March, the total retail sales of social consumer goods were - 3.5% year-on-year, an increase of 6.7 percentage points from January to February. The average month on month (MOM) of March 20162019 was 0.68%, compared with - 1.93% in this period, indicating that the epidemic has formed a serious drag on consumption. (1) The closure of the epidemic caused the obstruction of residents' aggregation and contact consumption, and the catering income decreased significantly in March; Travel related consumption, such as clothing, gold, silver and jewelry, also decreased significantly. (2) Due to poor logistics, online e-commerce shopping is also affected.
Real estate sales continued to decline, and the growth rate of real estate investment turned negative. Let's look at sales first. Since this year, more than 60 cities across the country have relaxed the real estate regulation policies by reducing the down payment ratio and reducing the mortgage interest rate, so as to stabilize the real estate market. However, the further deterioration of commercial housing sales in March shows that the deregulation of the policy has not brought about the recovery of the market. First, in the case of marginal decline in house prices, residents' willingness to buy houses is weak. Second, affected by the closure of the epidemic, residents' house viewing and purchase are limited, which has a negative impact on commercial housing sales. Looking at real estate investment, the weak sales increased the pressure on the source of real estate investment funds. In March, the deposit, advance collection and personal mortgage loans decreased significantly, limiting the ability of real estate investment.
The economy will be even worse in the second quarter. GDP in the first quarter increased by 4.8% year-on-year, up 0.8 percentage points from the fourth quarter of last year. On a month on month basis, GDP grew by 1.3% in the first quarter, weaker than 1.5% in the fourth quarter of last year. The epidemic blockade restricts supply and weakens demand. The uncertainty of the future epidemic blockade and the complexity of the external bad environment disturb expectations. Economic pressures are also reflected in the unemployment rate. In March, the national urban unemployment rate was 5.8%, up 0.3 percentage points from February, breaking the red line of 5.5%. Considering that more than 10 million graduates will enter the workplace from June to July, the pressure to ensure employment will only increase in the second half of the year. Looking back, we expect the economy to be worse in the second quarter. First, the epidemic was still at a high level in April. As of April 18, local cases had occurred in 23 provinces and cities. Since April, Xi'an, Chengdu, Guangzhou, Taiyuan and other places have begun to implement some or all sealing and control measures, and the impact scope is greater than that in March. Considering that the local epidemic is still fermenting, we think the impact of the epidemic on the second quarter may be higher than that in the first quarter. Second, GDP in the first quarter of 2021 increased by 0.5% month on month, with a low base, while it increased by 1.5% in the second quarter, with a significantly higher base.
Risk factors: vaccine failure caused by epidemic variation; China's policy exceeded expectations
