Economic activity rebounded more than expected in August.
With the gradual fading of the flood disaster in the south, the recovery of global demand, the normalization of domestic economic activities and the continuous recovery of credit growth, economic activities continued to pick up in August, and most major economic indicators performed better than market expectations. Specifically, although some real estate policies have been tightened recently, real estate sales and investment are still stable, the low base promotes the rebound of manufacturing investment, and the export performance exceeds expectations. In August, the year-on-year growth rate of industrial production improved, and the year-on-year growth rate of total retail sales of social consumer goods also turned positive for the first time since the epidemic. On the other hand, although the financial and special debt funds are more supportive, infrastructure investment slowed down slightly in August. The year-on-year decline in catering sales narrowed, but it still fell by 7%. The year-on-year growth rate of new real estate starts has also weakened, which may indicate that construction activities may slow down in the future.
The economy is expected to pick up further, but the chain growth rate is slowing down.
Looking ahead, if the epidemic continues to be controlled, we expect the economy to continue to pick up during the year. During the year, exports may maintain moderate positive growth, infrastructure investment will remain stable, and retail sales of social consumer goods are expected to continue to rise. The recent strong real estate activity and export rebound faster than expected mean that our real estate and GDP growth expectations may face certain upward risks. However, the recent tightening of real estate-related policies may restrain the rebound of real estate activities to a certain extent, and with the gradual resumption of production in other economies, the competition faced by China's exports may also intensify. On the whole, we maintain the real GDP growth of 5.5-6% in the third and fourth quarters, and the forecast of 2.5% for the whole year remains unchanged.
The policy is still loose, but it will not be further increased in the short term.
In view of the fact that economic activities and new credit in August exceeded expectations, we believe that the government's willingness to further increase policy easing may continue to decrease. However, in view of the epidemic situation and the uncertainty of Sino-US relations, we don't think the macro policy will be tightened soon. Fiscal policy should pay more attention to the rapid release and use of funds. In terms of monetary policy, we now expect that the central bank will not cut the MLF interest rate again this year, but the LPR interest rate may still be slightly lowered further. We expect that the overall credit growth rate may increase slightly from September to June, 10, and may slow down slightly by the end of the year. With the further recovery of domestic economic activities and the gradual improvement of external demand, the government may reassess its policy mix in the fourth quarter. China's economic growth was stronger than expected, and the momentum of monetary easing basically ended. These factors should be able to support the RMB exchange rate in the next few months, but we think it may be difficult for the RMB exchange rate against the US dollar to be significantly stronger than 6.8.
The performance of real estate activities exceeds expectations, which brings certain upward risks to the annual real estate forecast. Although the real estate policies of some cities showing signs of overheating have been tightened recently, the year-on-year growth rate of real estate sales in August further rebounded from the previous 9.5% to 13.7%, and the low base also pushed the average daily growth rate of real estate sales in 30 large and medium-sized cities back to 14%. The year-on-year growth rate of new construction in August slowed down from 1 1.3% to 2.4%, which may indicate that construction activities may slow down in the future. Although the financing conditions of real estate developers have been tightened recently, its impact has not yet appeared. In August, real estate investment still maintained a strong growth of 1 1.8%. In addition, due to the high base, the land transaction volume in August decreased by 7.6% year-on-year. Overall, UBS's construction activity index dropped slightly from 3.5% in July to 2.5% (three-month moving average). In view of the strong real estate investment in the past few months, our forecast of 3-5% growth in real estate investment for the whole year may face certain upward risks.
The strong rebound of real estate investment and manufacturing investment further accelerated the year-on-year growth rate of overall fixed asset investment, from 6. 1% in July to 7.6%. Even with strong financial and special debt funds, the year-on-year growth rate of infrastructure investment in August dropped slightly from 7.7% in July to 7. 1%, which was less than our expectation, partly because the base was slightly higher in the same period last year. Among them, due to the high base, the year-on-year growth rate of transportation investment dropped from 1 1.7% to 6.4%, and the year-on-year growth rate of investment in public utilities, water conservancy, environment and public facilities management industries was strengthened. The year-on-year growth rate of official narrow infrastructure investment (excluding public investment) also slowed down from 7.9% to 4%. On the other hand, due to the recent rebound in corporate profits, the base of the same period last year was low, and the manufacturing investment in August changed from the previous year-on-year decline of 3. 1% to a year-on-year increase of 5%. In addition, the year-on-year growth rate of mining investment rebounded to 3.5% with the support of a low base, while the year-on-year growth rate of investment in some service industries such as education, medical care, culture, sports and entertainment declined from the previous high.
In August, the retail sales of social consumer goods turned to a positive growth of 0.5% year-on-year (previously it was down 1. 1% year-on-year), but the catering sales still fell by 7% year-on-year. The year-on-year growth rate of overall social consumption and retail sales has turned positive for the first time since February, slightly stronger than market expectations. Among them, the year-on-year growth rate of commodity sales increased from 0.2% to 1.5%, while catering sales still decreased by 7% (previously, it decreased by 1 1%). Some of the main products (retail sales of units above designated size) benefited from the low base in the same period last year, and the automobile sales remained stable, with a year-on-year increase of11.8% (12.3% in July). The sales performance of real estate-related products is different, among which the sales of furniture and building materials have weakened, but the sales of household appliances have changed from the previous year-on-year decline of 2.2% to a year-on-year increase of 4.3%. In addition, the sales of clothing (from 2.5% to 4.2%), daily necessities (from 6.9% to1.4%), cosmetics (from 9.2% to 19%) and communication equipment (from160)
In August, the year-on-year growth rate of exports once again exceeded expectations and rebounded to 9.5% (previously 7.2%). The overall export is relatively stable (up 3.5% from April to August), mainly due to the strong export of protective and medical supplies and electronic products. At the same time, Sino-US trade friction dragged down the low base in the same period last year, and China was the first to get out of the epidemic, which also supported export activities. In August, the export of epidemic prevention materials remained stable (textile exports increased by 47% year-on-year, medical device exports increased by 39% year-on-year), the export of electronic products was relatively strong, and the export of clothing, shoes and boots also improved due to the improvement of external demand. On the other hand, after the strong growth in the second quarter, the import of bulk commodities declined, and the overall import further decreased by 2. 1% year-on-year (previously, it decreased by 1.4%). According to the latest census data of the United States, the first-stage agreement on China's imports from the United States, which started at the beginning of this year (1-July), involved US$ 40 billion, only reaching 28% of the annual target. However, we believe that despite the recent deterioration of Sino-US relations, both China and the United States tend to maintain the first-stage trade agreement unchanged, but before the June general election, the relevant uncertainty may further increase by 5438+065438+ 10 (see why China's exports are so strong? 》)。
Internal and external needs to improve and accelerate the year-on-year growth rate of industrial production in August to 5.6% (previously 4.8%), slightly exceeding market expectations. The year-on-year growth rate of industrial production rebounded mainly from the mining industry and public utilities, and the year-on-year growth rate of industrial added value in both industries rebounded by more than 4 percentage points. Specifically, the growth rate of added value of power and thermal industries, non-metallic mining industries, steel and chemical industries has accelerated. The year-on-year growth rate of mobile phone production has also rebounded, corresponding to strong mobile phone exports. On the other hand, the growth rate of industrial added value of automobiles (from 265,438+0.6% to 65,438+04.8%) and communication equipment (from 65,438+065,438+0.8% to 8.7%) slowed down, but remained relatively stable.
The overall credit growth rate has further improved. In August, RMB loans increased by 654.38+0.28 billion, of which new residential loans (842 billion, up by 654.38+0.88 billion) and medium and long-term loans of enterprises (725 billion, up by 297 billion) were relatively strong. In August, the scale of new social financing was 3.58 trillion yuan, which was significantly stronger than market expectations, with an increase of 1.38 trillion yuan year-on-year. The strong issuance of national debt promoted the substantial growth of new social financing in August; The strong new RMB loans with social financing caliber and the rebound of undiscounted acceptance bills are also important reasons why the new social financing exceeded expectations. In August, the issuance of new government bonds (net issuance 1.38 trillion, an increase of 874 billion over the same period of last year) rebounded sharply, among which the issuance of special bonds by local governments accelerated again, with a net issuance of more than 600 billion yuan in August, which is expected to continue to support infrastructure financing in the coming months. We estimate that the year-on-year growth rate of overall credit (excluding stock financing) increased again by 0.4 percentage points to 13.4% in August (the year-on-year growth rate of official social financing scale balance also increased by 0.4 percentage points to 13.3%), and our estimated credit pulse further rebounded to about 7.8% of GDP (see "New credit in August exceeded expectations, and the possibility of further easing decreased").
In August, the year-on-year growth rate of CPI declined slightly, and the year-on-year decline of PPI narrowed, both in line with expectations. Due to the high base in the same period last year, the year-on-year growth rate of pig prices dropped sharply from 86% to 53%, which also offset the strong vegetable prices brought by high temperature and rainy weather (the year-on-year growth rate increased from 7.9% to 1 1.7%). Therefore, the year-on-year growth rate of food prices dropped from 13.2% to1.2%, which pushed the year-on-year growth rate of CPI down slightly by 0.3 percentage points to 2.4%, although the year-on-year growth rate of non-food prices rebounded slightly to 0. 1%. On the other hand, the year-on-year decline of PPI narrowed from 2.4% to 2% in August, due to the relatively stable construction activities, the rebound in commodity prices and the low base in the same period last year. The year-on-year decline of upstream investment products continued to narrow from 3.5% to 3%, while the price of downstream consumer goods also dropped slightly by 0. 1 percentage point to 0.6%.
Economic growth and policy outlook
The overall economy continues to pick up ... assuming that the epidemic continues to be controlled, we expect the overall economy to continue to pick up during the year. With the gradual improvement of the global economy, exports should maintain moderate and positive growth during the year, and financial financing support will continue to support infrastructure investment. At the same time, after the impact of the floods in the south subsided in September, the retail sales of social consumer goods achieved a positive growth of 0.5% in August, which is expected to further improve.
... but the growth rate of the chain may slow down significantly. The strong rebound of economic activities since April is mainly due to the normalization of domestic production, construction and consumption activities. As economic activities basically return to normal, the rebound momentum of economic activities will inevitably slow down significantly. Even so, we still expect the year-on-year growth rate of real GDP in the third and fourth quarters to reach 5.5-6%. Recently, the marginal tightening of real estate policies in some cities with signs of overheating and stricter financing conditions for developers may inhibit future real estate activities to some extent, but the steady growth of real estate investment year-to-date means that our annual forecast of 3-5% faces certain upward risks. On the other hand, we expect that the continuous improvement of external demand will continue to support exports, but as other economies gradually resume production, the competition faced by China may also intensify. On the whole, we expect that in the remaining months of this year, China's exports will maintain a low single-digit year-on-year growth. In addition, we expect that consumption in the remaining months of this year should also achieve a low single-digit year-on-year growth.
The policy maintains a loose tone, but it will not be further overweight in the short term. We believe that macroeconomic policies will remain loose, but in view of the sustained recovery of overall economic activities and the recent export and new credit exceeding expectations, the policy easing should not be further strengthened in the short term. Fiscal policy should pay more attention to the rapid release and use of funds to support the financing of new infrastructure and major projects. In terms of monetary policy, we now expect that the central bank will not cut the MLF interest rate again this year, but the LPR interest rate may still be slightly lowered further. On the other hand, in view of the epidemic situation and the uncertainty of Sino-US relations, we don't think the central bank will start to tighten monetary policy soon. Considering the large-scale plan to issue treasury bonds in the future, we expect that the overall credit growth rate may further increase from September to June (to 65,438+03.8% predicted by UBS) and may slow down slightly by the end of the year. China's economic growth was stronger than expected, and the domestic monetary easing momentum basically ended. These factors should support the RMB exchange rate in the next few months, but we think it may be difficult for the RMB exchange rate against the US dollar to be significantly stronger than 6.8.
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