In April, China's economy suffered a cold spring: PMI data of both manufacturing and non manufacturing industries showed that the economic cycle was bottoming out (see China's macro data review in April - the economic cycle bottomed out, and supply and demand need to be improved urgently); Under the triple test of weakening demand, rising competition and blocked supply chain, the marginal decline of exports continued (see "comments on China's macro data in April - exports face triple test, and the differentiation of import structure shows" hot infrastructure and cold manufacturing "; The slowdown of industrial production, the overall coldness of investment and the epidemic continued to lead to the decline of consumption. We believe that the macro data in April objectively reflected the impact of the epidemic on the economy, and all performances were within expectations. When will it warm up after the cold spring? Considering the structural differences in the economy, we believe that the timing and path of each recovery are different:
In April, the industrial added value decreased by 2.9% year-on-year, lower than the Bloomberg market expectation (+ 0.5%) and the previous growth rate (5.0% year-on-year in March). The added value of manufacturing industry decreased by 4.6% year-on-year (up 4.4% year-on-year in March). The export of high-tech products weakened, driving the year-on-year growth rate of industrial added value of high-tech manufacturing industry to 4.0%; The year-on-year growth rate of industrial added value of automobile manufacturing (- 31.8%) and general equipment manufacturing (- 15.8%) led the decline. The recovery of supply chain is expected to support the month on month growth of manufacturing industrial added value in May. However, under the expectation of weakening overall exports, the recovery of domestic demand can alleviate the downward trend of manufacturing industrial added value.
In April, the year-on-year growth rate of fixed asset investment decreased from 3.5% in the previous period to - 0.7%, and the decline (4.2 percentage points) was slightly narrower than that in the previous period (8.7 percentage points). Taking into account the decline in the base, the year-on-year growth rate of 2.0% of manufacturing investment in April reflects that the financing demand of the real economy is still weak. In April, the year-on-year decline in real estate development investment expanded from - 5.3% in the early stage to - 12.9%. In April, the year-on-year growth rate of new house sales (- 48.6%) and sales area (- 42.4%) continued to decline, exceeding the level from January to February 2020. The Central Bank of China lowered the lower limit of the first house interest rate on May 15, but we believe that the policy adjustment is limited, but the signal effect is obvious. We expect that the Central Bank of China may still cut interest rates in the future to support investment growth.
In April, the year-on-year decline in the total retail sales of social consumers expanded from - 3.5% in the previous period to - 11.1%, which was lower than the Bloomberg market expectation (- 6.6%). Among them, the average annual growth rate of commodity retail in the three years is - 0.5%; The three-year average annual growth rate of catering income was - 7.4%. The impact of the rebound of the epidemic caused the income of commodity retail and catering to be lower than that before the epidemic. We believe that the current consumption downturn is not sustainable. When the epidemic situation is stably controlled, consumption will rebound significantly, and service consumption will rebound more significantly than commodity retail due to greater flexibility.
