GDP was weak in the first quarter, which was more severe in the second quarter
In the first quarter, China's GDP grew by 4.8% year-on-year, which is still weak as a whole, lower than the annual GDP of 5.5% 5% growth target. By industry, the contribution of the secondary industry is relatively large, which is mainly affected by the advance force of the supply side such as finance and infrastructure. Since March, China's epidemic has spread in many places, and the economic growth rate has dropped again. The epidemic situation in April is more severe and will appear in the second quarter. Production: the recovery of production slowed down, and the energy metal mining and dressing industry remained resilient
Production fell significantly year-on-year. The industrial added value in March was 5%, down 2.5 percentage points from January to February (7.5%), and the capacity utilization rate of industry and manufacturing industry fluctuated downward, the lowest since the second quarter of 2020. The toughness of the upstream raw material industry is better than that of the middle and downstream industries. In March, the industrial added value of coal mining and washing industry, oil and natural gas mining industry, ferrous metal mining and dressing industry, nonferrous metal mining and dressing industry and other industries increased by 16.70%, 5.70%, 12.20% and 11.40% respectively year-on-year, maintaining a high growth rate. The rise in energy and commodity prices caused by the conflict between Russia and Ukraine is one of the important factors. In addition, the forward force of steady growth policy and infrastructure projects is first reflected from the upstream of the industrial chain.
Policies promote the acceleration of infrastructure investment, while manufacturing and real estate are weak. Farmers' investment in fixed assets decreased by 2.9% year-on-year (excluding the first quarter). After excluding the impact of price, the growth rate of fixed asset investment in the first quarter will be lower. Investment in infrastructure construction increased by 10.48% year-on-year, 1.86 percentage points higher than that in February, mainly affected by the advance of the steady growth policy. Fixed asset investment in manufacturing was 15.6%, down 5.3 percentage points from the growth rate in February. The growth rate of fixed asset investment in manufacturing industry declined. First, the low base from January to February last year caused the rapid growth rate from January to February this year. The increase of the base in March last year led to the decline of growth rate in March this year; Second, affected by the epidemic, social demand has declined and enterprises' willingness to invest has declined; Third, the rise in the price of raw materials has reduced the willingness of enterprises to invest and expand production. Real estate investment slowed down. In the first quarter, real estate investment increased by 1.8% year-on-year, down 2.9 percentage points from February, but there was no stall decline.
Consumption increased negatively due to the impact of the epidemic, and it is still not optimistic in the second quarter. The epidemic had a serious impact on social consumer goods. In March, the total retail sales of social consumer goods decreased by 3.53% year-on-year, and the value increased by 1.70% in February. The year-on-year change of social consumer goods fell again since July 2020. Catering and commodity retail were greatly impacted by the epidemic. In March, retail sales of goods reached 3129.8 billion yuan, down 2.1% year-on-year; Catering revenue was 293.5 billion yuan, down 16.4%. The severity of the national epidemic in April is higher than that in March. It is still uncertain whether the epidemic can be controlled or not fall into multi-point distribution again from May to June. It is expected that social consumption will continue to be suppressed in the second quarter.
Interest rate: the market interest rate decreased and the credit spread narrowed
In April, the 1-year and 5-year LPR interest rates remained unchanged at 3.7% and 4.6% respectively. The LPR interest rate remained unchanged for three consecutive months. As of April 27, the overall price of long-term and short-term funds in this month showed a downward trend, and the credit spread narrowed
Exchange rate: it has fallen sharply in the short term, and there is still room for devaluation of the RMB
The RMB exchange rate depreciates rapidly in the short term, and the upside down of interest rate spread is the fuse. The current round of RMB exchange rate depreciation is basically synchronized with the narrowing of China US interest rate spread. The upside down of China US interest rate spread is the incentive to accelerate the depreciation since April 19.
The pressure of capital outflow has increased, which restricts the policy tools for steady growth. The narrowing of the interest rate gap between China and the United States has led to the decline of China's asset prices and the intensification of capital outflow pressure. In March, the foreign capital of land stock connect flowed out by a large amount of 45.083 billion yuan. Although it was a net inflow as a whole in April (as of 27), the amount has decreased significantly compared with the previous period. The narrowing or even upside down of the interest rate gap between China and the United States restricts the monetary policy, and the interest rate reduction policy will be used cautiously.
The central bank stabilized the exchange rate, and the RMB still has room for depreciation. On April 25, the central bank announced that it would reduce the foreign exchange deposit reserve by 1 percentage point from May 5. By lowering the interest rate of foreign exchange deposit reserve, the central bank conveyed its determination to control risks to the market, but what it prevented and controlled was the risks caused by the rapid depreciation of RMB, not the depreciation itself. Under the background of high inflation in the United States and China, the expectation of interest rate increase by the Federal Reserve has gradually increased, and the negative impact of the recent Chinese epidemic on the economy has increased, and there is still some room for RMB devaluation.
Price: "pig oil" is expected to be changed to "pig oil", with great inflationary pressure in the future
"Pig oil", CPI increased by 1.5% year-on-year. The sub item with the largest increase this month was transportation and communication, which was mainly caused by the sharp rise in the price of fuel for transportation vehicles. The geopolitical crisis leads to the rise of international energy prices, which is transmitted to the whole industrial chain, and the fuel for vehicles such as gasoline and diesel bears the brunt. In March, the price of vehicle fuel increased by 24.1% year-on-year, 7.1% month on month, and 22.6% year-on-year from January to March, which was the largest increase. Pork prices continued to fall, down 9.3% month on month and 41.4% year-on-year, still at the bottom of the industry cycle. Affected by the epidemic and the fall in demand after the Spring Festival, the service price decreased by 0.2% month on month and increased by 1.1% year-on-year. At present, inflation is still in a controllable range. With the transmission of energy and commodity prices to the whole industrial chain, CPI is expected to continue to maintain a moderate upward trend.
The rise in commodity prices was the main factor in the month on month rise of PPI. In March, PPI rose 8.3% year-on-year and 1.1% month on month. The rise in international commodity prices was the main factor driving the month on month rise of PPI. The larger increases were the prices of oil and natural gas exploitation industry and oil, coal and other fuel processing industry, up 14.1% and 7.9% respectively. The year-on-year increase of PPI fell for five consecutive months, mainly affected by the high base in the same period last year.
The ppi-cpi scissors gap narrowed for five consecutive months. In March, the scissors difference between PPI and CPI narrowed to 6.8 percentage points, falling for the fifth consecutive month. The decline of "scissors gap" helps to alleviate the cost pressure of industrial enterprises caused by the rise in commodity prices, which is a benign adjustment of the market. With the continuous introduction of the steady growth policy, the business environment of enterprises, especially small and medium-sized enterprises, will be improved to a certain extent.
Inflationary pressures remain high this year. We expect that as pork gradually steps out of the decline cycle, the inhibitory effect of pork on the rise of CPI index will weaken. Energy prices are sensitive to changes in the international political situation. There is still no sign of decline in the short term and are expected to continue to fluctuate at a high level. The rise in the prices of crude oil, non-ferrous metals and other bulk commodities will be gradually transmitted to the downstream. At present, the situation of "pig oil under the pig oil on the pig oil" has the probability of changing to "pig oil as above", and the inflationary pressure is still large this year.
Foreign trade: the development momentum in the first quarter is good, and RECP is expected to expand foreign trade space
In the first quarter, foreign trade continued to maintain a steady growth momentum. In the first quarter, the total import and export value of China's goods trade increased by 13.00% year-on-year. Among them, exports increased by 15.80%; Imports increased by 9.60%. In the first quarter, foreign trade import and export showed five characteristics: first, the proportion of general trade import and export increased; Second, both imports and exports with major trading partners increased; Third, the import and export toughness of foreign trade business entities is sufficient; Fourth, the export of major categories of products maintained a good trend; Fifth, the smooth operation of mechanical and electrical products and Shenzhen Agricultural Products Group Co.Ltd(000061) imports. China's foreign trade grew steadily for seven consecutive quarters, laying a solid foundation for the year-on-year growth of China's foreign trade.
The slowdown was affected by last year's high base. Affected by the high base in 2021, the growth rate of China's total import and export to the top five trading partners slowed down in the first quarter of 2022; However, the growth rate increased significantly compared with that before the epidemic. In the first quarter, China's total imports and exports to the top five trading partners ASEAN, the European Union, the United States, South Korea and Japan (denominated in US $100 million) increased by 10.70%, 12.20%, 12.20%, 14.60% and 3.90% respectively; The export of mechanical and electrical products and labor-intensive products maintained rapid growth. At present, China's external environment is more complex and uncertain than expected, but the world economy is still in the stage of recovery, and the recovery of international industrial chain has not stopped the expansion of demand for Chinese products.
RECP will play an important role in China's foreign trade. In the first quarter, the growth rate of exports to RECP member countries was much higher than that of imports. RECP will help promote exports and play an important role in stabilizing growth. In the first quarter, China's imports and exports to 14 other RCEP member countries amounted to 2.86 trillion yuan, a year-on-year increase of 6.9%, accounting for 30.4% of China's total foreign trade. Among them, the export was 1.38 trillion yuan, an increase of 11.1%; Imports reached 1.48 trillion yuan, an increase of 3.2%. On January 1 this year, RECP officially came into force, and the ASEAN market was further opened, which is expected to further expand China's foreign trade prospects. In March, ASEAN surpassed the EU and returned to China's largest trading partner.
Risk tips
The effect of policy implementation was not as expected, the epidemic situation deteriorated, international relations deteriorated, and local debt risks erupted intensively.
