High-frequency data demonstrates economic warmth, multiple institutions are optimistic about economic trends
As China's economy enters the second half of the year, the upcoming June and second quarter major macroeconomic data will receive particular attention. Recently, a series of leading indicators and high-frequency data such as manufacturing PMI, power generation, and excavator sales have been intensively released, demonstrating the boom in supply and demand. Many institutions have also expressed optimism about China's economic trends. It is expected that the industrial added value in June will exceed expectations, investment and consumption recovery will accelerate further, and the GDP growth rate in the second quarter will likely turn positive.
It is worth mentioning that although the economic warmth is stronger, the demand for repair is still slower than the production repair speed. Judging from the recent policy signals released by relevant ministries and commissions and local governments, in the second half of the year, multiple simultaneous efforts to boost domestic demand will continue to be the top priority for stable growth. With the accelerated implementation of more vigorous policies, economic growth is expected to pick up quarter by quarter in the second half of the year.
"Since the second quarter, the overall promotion of epidemic prevention and control and economic and social development has shown results, production demand has continued to improve, and the main indicators have improved significantly compared with the first quarter." said Gao Ruidong, chief macro analyst at Guotai Junan Securities.
As a "barometer" of economic and social operations, the country's power generation is growing at a faster rate in June after the growth rate of the country rebounded significantly in May. According to data from the State Grid, the national full-caliber power generation in early June increased by approximately 9.1% year-on-year. "The rapid industrial repair, night-time work and increased workload are more likely to be the main driving force for the current high growth of power generation." Li Chao, chief economist of Zheshang Securities, pointed out that the higher-than-expected power generation in the first half of June is a further trend of the economy. Good performance, and indicates that the industrial added value in June is more likely to exceed expectations.
Another leading indicator-manufacturing PMI has been in the expansion range for 4 consecutive months. Among them, the manufacturing PMI reached 50.9% in June, 0.3 percentage points higher than last month. Among the sub-indices, the production index and the new order index were 53.9% and 51.4%, respectively, up 0.7 and 0.5 percentage points from the previous month, indicating that both supply and demand are booming.
In June, sales of various excavation machinery products totaled 24,600 units, a year-on-year increase of 62.9%; automobile production and sales reached 2.325 million and 2.30 million vehicles, an increase of 22.5% and 11.6% year-on-year; express delivery business volume is expected to exceed 7.6 billion units, an increase of approximately 40%... Regardless of the supply side or the demand side, a series of high-frequency data ran out of acceleration, releasing more economic warmth.
"A series of leading indicators show that the economic recovery momentum is improving, and the economic growth rate is expected to turn positive in the second quarter. Although the government work report this year did not put forward economic targets, it is still very necessary to stabilize economic growth from the perspective of employment and other targets. This trend will continue in the second half of the year," said Liu Xiangdong, deputy director of the Economic Research Department of the China Center for International Economic Exchanges.
Lin Zhiyuan, deputy director of the Macroeconomic Research Center of Xiamen University, said that the economic recovery in the second quarter was obvious. Accelerated increase in the amount of special bonds, superimposed special bonds to increase the proportion of project capital, drove a higher growth rate of infrastructure investment; lower mortgage interest rates under the loose monetary policy also promoted the accelerated restoration of the real estate industry. "The economy is expected to continue to achieve V-shaped restoration in the second half of the year. If the epidemic at home and abroad is controllable, the economy will usher in a resonance drive of domestic and foreign demand."
Many domestic and foreign institutions also expressed optimism about China's economic trends. CITIC Securities believes that China's economy is expected to return to pre-epidemic levels within this year. Guotai Junan Research Report pointed out that China's economy will achieve endogenous improvement quarter by quarter in the second half of the year. According to the International Monetary Fund (IMF) World Economic Outlook, China’s economic situation should perform better in the coming months.
However, experts also pointed out that the current production repair speed is still faster than the demand side, and speeding up demand boosting, especially the firm implementation of the strategy of expanding domestic demand, is still the top priority for steady growth in the second half of the year.
Liu Xiangdong said that due to the impact of the epidemic, the domestic demand market has been suppressed and frozen to a certain extent. Under the premise of effective prevention and control of the epidemic, various policies have been introduced from the central to the local level to effectively promote the expansion of domestic demand, especially to promote consumption replenishment and potential release. In addition, the current external demand is still insufficient, and the further introduction of policies and measures to expand domestic demand is also conducive to stabilizing production and supply, ensuring stable operation of enterprises, especially small, medium and micro enterprises, and overcoming difficulties.
It is worth noting that, from ministries and commissions to local deployments, major projects to drive investment recovery, and multiple measures to promote a rebound in consumer demand, boosting domestic demand will be the top priority for steady growth in the second half of the year.
Recently, the National Development and Reform Commission has intensively issued investments within the central budget to support key areas and major projects. At the same time, special bonds are also accelerating the pace of issuance. According to data from the Ministry of Finance, the issuance of local government bonds in the first half of the year reached 3486.4 billion yuan, of which 221.3 billion yuan was issued for special bonds. It is reported that all new bond funds are invested in major projects in the field of infrastructure and public services, which have played a positive role in expanding effective investment, doing a good job in the "six stability" and implementing the tasks of the "six guarantees".
In the next step, the relevant funds will also accelerate the implementation of the actual effect. The finance and taxation department's symposium held on July 10 also emphasized that in implementing proactive fiscal policies, it is necessary to strengthen coordination, form policy synergy, and amplify policy effects, so as to provide strong support for the stable operation of the economy and the overall stability of the society.
At a special press conference held by the Ministry of Commerce a few days ago, Li Danghui, deputy director of the Consumer Promotion Department of the Ministry of Commerce, said that a nationwide consumption promotion activity will be held in the second half of this year.
At the local level, many localities have intensively introduced a package of upgraded measures to stabilize investment and promote consumption. For example, Shenzhen recently issued a notice on several measures to further stimulate consumption vitality and promote consumption growth; Fujian, Shaanxi and many other places continued to make efforts to stabilize investment and continue to organize and strengthen major projects on the basis of "more than half of the time and more than half of the tasks completed" this year. Projects are planned to be generated and started in a timely manner, resulting in more physical engineering quantities and investment increments.
Gao Ruidong said that the current domestic epidemic has been effectively controlled, but the continued expansion of overseas epidemics will continue to affect external demand. In addition, flood control has entered a critical period of "seven ups and eight downs", and the situation is particularly severe. In the second half of the year, efforts will be made to implement the "six stability" and "six guarantees", and strive to continue the good momentum of economic recovery. In his view, only by actively expanding domestic demand can we create a new dual-cycle development pattern featuring domestic circulation and mutual promotion between international and domestic. This is of great strategic significance for my country to maintain a stable economic development in the context of the raging global epidemic.
"On the one hand, it is necessary to actively stabilize employment, promote income growth, strive to tap the growth potential of new types of consumption, and maximize the supporting role of household consumption on demand. On the other hand, it is necessary to play the countercyclical adjustment role of macroeconomic policies through large-scale Reduce taxes and fees, actively expand effective investment, and focus on supporting the construction of the "two new and one heavy" construction, so as to maximize the stability of total demand." Gao Ruidong said.
Liu Xiangdong believes that stable growth in the second half of the year urgently requires a combination of fiscal and monetary policies to promote and stabilize the development of small, medium and micro enterprises, and domestic demand drives the recovery of the supply chain as soon as possible. "It is necessary to guide demand recovery while optimizing supply, forming major projects that not only promote the present but also benefit the long-term, meet the shortcomings of public health, new infrastructure and other fields, as well as people's growing consumption upgrade needs, and ensure stable economic growth. Zhiyuan." Liu Xiangdong said.