Under the influence of international geopolitical events and the continuous spread of the epidemic in China, the downward pressure on the economy has increased significantly. The impact of the epidemic was most obvious in March, and the growth rate of production, investment and consumption has fallen. The impact on the demand side is greater than that on the production side. With the support of the steady growth policy, the investment side has shown strong resilience. We expect that a large proportion of the impact of the epidemic on economic growth will be concentrated in the second quarter. If the spread of the epidemic leads to the continuation of prevention and control measures, it may have a great drag on Q2 economic growth. It is expected that the unemployment rate of urban residents will decline sharply in March, and it is still difficult to reverse the seasonal decline of PMI. However, the recent policy support direction has gradually shifted from supply to demand, and the multi City real estate policy has also been partially relaxed. We expect that the steady growth policy may form a greater strength.
Q1 economic growth is less than 5%. GDP in the first quarter of 2022 increased by 4.8% year-on-year, with a growth rate of 0.8 percentage points higher than that in the fourth quarter of last year. However, after excluding the influence of the base, the average annual growth rate of the two years decreased compared with that in the fourth quarter of last year. From the perspective of month on month growth rate, the quarter on quarter growth rate of GDP in the first quarter of 2022 was 1.3%, which was also lower than that in the fourth quarter of last year.
Production has slowed down, equivalent to the level during the power shortage period. In the first quarter, the growth rate of added value of Industrial Enterprises above Designated Size recorded 6.5%, while the year-on-year growth rate of industrial added value in March recorded 5%, a slight decrease of 2.5 percentage points compared with the growth rate from January to February, and the production index of service industry also changed from positive to negative to - 0.9%. On the whole, under the interference of China's local epidemic, production slowed down significantly, and the current production situation is basically the same as that in the period of power shortage last year. From a meso perspective, the growth rate of added value of 20 major industries increased less and fell more. Except for the growth rate of added value of coal mining, non-metallic minerals, steel and nonferrous metals in the upper reaches, the growth rate of added value of other industries decreased compared with the growth rate from January to February, among which the middle and lower reaches industries such as wine, beverage, tea, automobile and general equipment decreased significantly. At the micro level, the growth rate of raw coal, chemical fiber, non-ferrous metals, steel and cement output rebounded compared with that from January to February, among which the growth rate of cement output rebounded the most, while the growth rate of power generation, ethylene and automobile output fell, among which the growth rate of automobile output turned negative again, ending the improvement trend since the third quarter of last year.
The growth rate of investment has changed from up to down, and infrastructure investment is outstanding. In the first quarter, the year-on-year growth rate of national fixed asset investment was 9.3%, of which the year-on-year growth rate in March fell significantly to 6.7%, and the year-on-year growth rate of private investment fell synchronously to 5.7%. Among the three categories of investment, the growth rate of manufacturing investment in March dropped sharply to 11.9%; In March, the year-on-year growth rate of real estate investment also changed from positive to negative to - 2.4%; Driven by the rapid issuance of local government special bonds and the forward force of fiscal policy, the growth rate of infrastructure investment under the old caliber and the new caliber continued to pick up in March. Overall, due to the interference of the epidemic, the investment growth rate tended to weaken in March, in which the manufacturing industry and real estate investment both fell. Only the growth rate of infrastructure investment rebounded against the trend, supporting the strong operation of investment growth. However, it should be noted that the growth rate of private investment was disturbed by the crowding out effect to a certain extent.
The impact of the epidemic on consumption turns negative, and the resilience must be stronger than optional. In the first quarter, the growth rate of social consumer retail and retail above the quota recorded 3.3% and 5.4% respectively, of which the growth rate in March was - 3.5% and - 1.4% respectively, from positive to negative compared with that in January and February, and the growth rate of social zero month on month also turned negative. Affected by the control measures taken against the epidemic throughout the country, the year-on-year growth rate of catering revenue in March changed from positive to negative to - 16.4%. By category, the growth rate of essential and optional consumer goods fell in March, and the decline of optional consumption was greater. Specifically, the growth rate of grain, oil and food, Chinese and Western medicines and beverages in essential consumer goods improved slightly, the growth rate of other necessities fell, and the decline rate of clothing and daily necessities exceeded 10 percentage points; The growth rate of optional consumer goods fell comprehensively from January to February, including gold and silver jewelry, cosmetics, petroleum products and automobiles.
Sales remained sluggish and new construction fell sharply. The year-on-year growth rate of national real estate sales area in March 2022 was - 17.7%, which was larger than the growth rate from January to February. On the one hand, the decline of real estate sales was affected by the high base in the same period last year. On the other hand, under the repeated epidemic in China, the weak real estate sales side continued to be depressed, which confirmed that the new medium and long-term loans of resident departments continued to increase negatively year-on-year. In March, the growth rate of new construction area expanded to - 22.2%, and the growth rate of construction area also changed from positive to negative to - 21.5%. In March, the growth rate of land purchase area narrowed slightly, but the base decreased in the same period last year. On the whole, the prosperity of the land market is still low. In March this year, the year-on-year growth rate of the completed area also increased.
The downward pressure on the economy has increased, and the impact of the epidemic has gradually deepened. In the first quarter, affected by international geopolitical events and the continuous spread of the epidemic in China, the GDP growth rate decreased compared with the average annual growth rate in the fourth quarter and the two years of last year, the main economic indicators such as production, investment and consumption also decreased, and the downward pressure on the economy increased significantly. Among them, the impact of the epidemic was particularly obvious in March. From the demand side, the consumption growth rate fell to a negative range in March, the service consumption represented by catering was severely suppressed, and the real estate sales also continued to be depressed; From the production side, under the guidance of the general policy of "dynamic clearing", many sealing control or silent management measures were taken, which caused a certain degree of interference to the production side, and the industrial added value ended the repair trend since the third quarter of last year. However, there are still two highlights in the economic data in March. First, under the forward force of policies, the growth rate of infrastructure investment rebounded against the trend, forming a strong support for investment; Second, the resilience of essential consumer goods is strong, and the decline range is significantly smaller than the overall decline of social consumer retail. From the current situation, the impact of the epidemic on the economy may last for some time, and the economic recovery in the second quarter will still be blocked. On the one hand, the national urban survey unemployment rate rose to 5.8%, the PMI of the service industry in March fell sharply below the boom and bust line compared with that from January to February, and the expected weakness of the residents' department continued. On the other hand, although the regulation of "implementing policies for the city" of real estate has been continuously promoted since February, the growth rate of real estate sales is still declining, and the underlying economy may still need greater efforts of policies.
Risk tip: policy changes, economic recovery is less than expected.
