Event: the initial value of the real GDP of the United States in the first quarter of 2022 was - 1.4%, which turned into a negative value. The market expectation was 1.1%, and the previous value was 6.9%, which was significantly lower than the market expectation and the previous value.
Core view:
\u3000\u30001. In the first quarter, the month on month growth of US GDP turned negative, mainly due to net exports and private inventory investment
And government spending decreased month on month, but personal consumption and private investment continued to grow. Specifically:
1) private consumption expenditure: in the first quarter, private consumption expenditure in the United States increased by 2.7% month on month, 2.5% in the fourth quarter of last year, driving GDP growth by 1.83 percentage points and 1.76 percentage points in the fourth quarter of last year. The growth rate and contribution rate have increased. In terms of sub items, commodity consumption decreased by 0.1% month on month, but durable goods increased by 4.1% month on month, which was much higher than the 2.5% in the previous quarter. Among them, automobiles and parts increased significantly by 14.3% month on month, which was significantly higher than the - 6.3% in the previous quarter, reflecting the booming demand of American residents for automobiles. Non durable goods decreased by 2.5% month on month, of which gasoline and other energy commodities were the largest drag, down 17.6% month on month, indicating that high oil prices led to a reduction in related consumption. In terms of service consumption, service consumption increased by 4.3% month on month in the first quarter and 3.3% in the fourth quarter of last year. Among them, household service consumption expenditure, food consumption and other sub items continued to grow, indicating that U.S. residents' service consumption is gradually recovering.
2) private investment: private investment in the United States increased by 2.3% month on month in the first quarter, 36.7% in the fourth quarter of last year, driving GDP growth by 0.43 percentage points and 5.82 percentage points in the fourth quarter of last year. In terms of fixed asset investment, it increased by 7.3% month on month in the first quarter and 2.7% in the previous quarter. It continued to improve month on month, driving GDP growth by 1.27 percentage points, of which equipment investment increased by 15.3% month on month, 12.3 percentage points higher than the previous quarter, and non residential investment increased by 9.2% month on month, 6.3 percentage points higher than the previous quarter. In terms of inventory investment, inventory investment dragged down GDP growth by 0.84 percentage points in the first quarter, while it drove GDP growth by 5.32 percentage points in the last quarter, with a large decline. According to the U.S. Bureau of economic analysis, the decline in Automobile wholesale and retail constitutes the main part of the decline in inventory investment.
3) import and export: in the first quarter, the net export of the United States dragged down the GDP growth by 3.2 percentage points, an increase of 2.98 percentage points over the previous quarter, which is the main reason for the negative GDP growth of the United States this time. In terms of imports, imports increased by 17.7% month on month in the first quarter, down 0.2 percentage points from the previous quarter, and dragged down GDP growth by 2.53 percentage points. Among them, commodity imports increased by 20.5% month on month, 1.6 percentage points higher than the previous quarter, and service imports increased by 4.1% month on month, 9 percentage points lower than the previous quarter. In terms of exports, exports fell 5.9% month on month in the first quarter, down 28.3 percentage points from the previous quarter. Among them, commodity exports contributed the main part of the decline, down 9.6% month on month, down 33 percentage points from the previous quarter.
4) government expenditure: in the first quarter, government expenditure decreased by 2.7% month on month, 0.1 percentage point lower than the previous quarter, dragging down GDP growth by 0.48 percentage points. Among them, federal government expenditure decreased by 5.9% month on month, down 1.6 percentage points from the previous quarter, and state and local governments decreased by 0.8% month on month, up 0.8 percentage points from the previous quarter. It shows that the US government's fiscal stimulus is gradually declining, which is in line with market expectations.
\u3000\u30002. Although the US GDP grew negatively in the first quarter, it does not mean that the US economy has begun to enter recession. We expect the US economy to maintain a resilient downward trend, and US stocks closed higher after the data release.
1) personal consumption and private investment remained strong, still growing compared with the previous quarter. In fact, consumption accounts for the highest proportion of the U.S. economy, about 70%, followed by private investment, about 18%. At present, the balance sheet of the U.S. residential sector is healthy, wages are also growing rapidly, and service consumption has not yet returned to the normal level before the epidemic. With the unsealing of the epidemic, residents' consumption will continue to shift from commodity consumption to service consumption, driving the continuous recovery of service consumption, so as to promote the continuous growth of personal consumption. Meanwhile, the production part of fixed asset investment in the United States continued to expand in the first quarter, indicating that the capital expenditure of American enterprises continued to increase. Despite the decline in inventory investment, on the one hand, it may be that enterprises were more active in replenishing inventory in the face of strong demand in the fourth quarter of last year, resulting in weak motivation for replenishing inventory at present. On the other hand, it may also be that it is more difficult to replenish inventory due to the epidemic situation such as Omicron. In the follow-up, at present, the demand of American residents for cars is still strong, the follow-up inventory investment may maintain a steady growth, the profits of American enterprises are still high, and private investment will also maintain resilience, so as to provide strong support for American economic growth.
2) although there is a drag on import and export, it is mainly due to the strong demand in China, and the subsequent impact is expected to converge. Government spending may continue to drag down economic growth, but the impact is small. From the import and export data, the main reason for the drag of US net exports on GDP growth is the deficit in commodity trade, which reached US $125.3 billion in March, a record high. Imports are mainly consumer goods such as oil, cars and mobile phones. There may be two reasons for this: on the one hand, due to the outbreak of the conflict between Russia and Ukraine, American enterprises have accelerated the import of bulk commodities such as oil and automobiles and finished products, and reduced the corresponding commodity export to cope with the possible shortage in the future; On the other hand, due to the recent severe inflation situation, high fluctuations in commodity prices and a large increase in the price of imported commodities in the United States, the two have jointly raised the deficit of U.S. Commodity trade. U.S. import data continue to grow, showing that U.S. demand remains strong at present, which is consistent with the continuous expansion of U.S. private consumption expenditure. It will become an important force to support U.S. economic development in the future. Subsequently, with the gradual weakening of the impact of geopolitical conflicts, the decline in U.S. demand caused by the Fed's interest rate hike and the export of natural gas and other commodities from the United States to the EU, the U.S. Commodity trade deficit is expected to converge. In terms of government expenditure, at present, the U.S. fiscal stimulus policy has gradually withdrawn, and the Biden government's fiscal plan has been repeatedly blocked, so it is difficult for relevant fiscal expenditure to expand continuously. However, due to the relatively low proportion of fiscal expenditure in US GDP, the negative impact is small.
3) overall, although the GDP growth of the United States turned negative in the first quarter, the main driving forces of economic growth such as consumption and investment remained strong, and the U.S. economy was not worried about recession for the time being. In the follow-up, we believe that with the Fed's continuous interest rate hike and the erosion of high inflation on Residents' real income, the domestic demand and investment of the US economy may gradually decline, maintain a resilient decline throughout the year, and the economic growth may decline to a certain extent in the middle of next year.
\u3000\u30003. The Fed announced interest rate hike in May, and we expect that the Fed will continue to tighten at a faster pace in May. Although the GDP of the United States in the first quarter was lower than expected, the fundamentals of the U.S. economy are still relatively strong, especially the continuous recovery of service consumption, which may bring the high level of inflation hovering and it is difficult to fall back quickly. According to the data released this time, the PCE of the United States increased by 7.0% year-on-year in the first quarter, 6.4% in the previous quarter, 5.2% in the core PCE and 5.0% in the previous quarter. As the inflation indicator most concerned by the Federal Reserve, the current PCE level has far exceeded the tolerance range of the Federal Reserve. Superimposed on the rising wages caused by the tension of the labor market, the Federal Reserve will still maintain the original fast pace of interest rate hike. We maintain the judgment that the Federal Reserve will raise interest rates continuously from May to June. Among them, the interest rate hike in May is 50bp, and the scale will be reduced immediately. The scale reduction speed will be faster and stronger.
Risk tips
International tensions triggered higher than expected inflation, and the covid-19 epidemic situation deteriorated significantly.
