The much-anticipated first-quarter economic report for China in 2024 has been revealed today, showing a positive start to the economy. Data released by the National Bureau of Statistics on April 16th indicates that the preliminary calculation of the Gross Domestic Product (GDP) for the first quarter was 29.6299 trillion yuan, representing a year-on-year increase of 5.3% at constant prices, and a sequential growth of 1.6% compared to the fourth quarter of the previous year. In the first quarter, the national value added of industries above designated size grew by 6.1% year-on-year, and the total retail sales of consumer goods increased by 4.7% year-on-year. The national fixed asset investment (excluding rural households) grew by 4.5% year-on-year, accelerating by 1.5 percentage points compared to the full year of the previous year.
Sheng Laiyun, the Deputy Director of the National Bureau of Statistics, stated at a press conference held by the State Council Information Office on the same day that the national economy has started well in the first quarter, with an increasing accumulation of positive factors, laying a good foundation for achieving the annual target tasks. The policy effects are continuously emerging, with steady production and demand, overall stable employment and prices, and continuously strengthening market confidence. High-quality development has achieved new results, and the national economy continues to show an upward trend.
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He also pointed out that it is necessary to recognize the increasing complexity, severity, and uncertainty of the external environment, and that the foundation for a stable and positive economic development is not yet solid. In the next phase, efforts should be made to actively cultivate new productive forces, strengthen the implementation of macro policies, enhance economic vitality, prevent and resolve risks, and improve social expectations. This will consolidate and strengthen the upward trend of the economy, and continuously promote the economy to achieve effective improvement in quality and reasonable growth in quantity.
The GDP growth rate in the first quarter was better than market expectations. Luo Zhiheng, Chief Economist at Yuexiu Securities, analyzed that this is due to local governments actively implementing the deployment of the Central Economic Work Conference at the first meeting of the new year, with policies taking effect early, financial support for the real economy increasing, and the use of additional government bonds issued last year in the first quarter of this year.
Wang Qing, Chief Macro Analyst at Orient Gold & Credit, stated that there are three main factors behind the "good start" of the economy in the first quarter: First, the previous reserve requirement ratio reduction and LPR interest rate cuts have been implemented, and recent policy measures such as large-scale equipment updates and durable consumer goods replacement have gradually shown their effect on boosting domestic demand. Among them, the current infrastructure investment maintains a relatively fast growth, which is a specific manifestation of the policy's efforts to stabilize growth. Second, represented by the rapid growth of service consumption and manufacturing investment, the internal growth momentum of the current economy is also improving. Third, influenced by cyclical factors, overseas demand has also been warming up overall at the beginning of the year.
Recently, foreign institutions have been raising their forecasts for China's economic growth in the first quarter and for the whole year. Based on the strong performance of the manufacturing industry, Goldman Sachs' macroeconomic team revised the forecast for China's first-quarter real GDP growth rate from the previous 5.6% to 7.5%, and the forecast for China's GDP growth rate for the whole year of 2024 from the previous 4.8% to 5.0%. Citigroup also recently raised its forecast for China's GDP growth rate for this year from the original 4.6% to 5%.
Looking at the sub-indicators, as factors such as the Spring Festival being in a different month and low base effects fade, there was a decline in indicators such as industry and consumption in March. However, the growth rate of manufacturing and infrastructure investment has remained high, and the overall economic momentum is still in the process of recovery.
From the production side, the value added of industries above designated size in the first quarter grew by 6.1% year-on-year, of which the value added of industries above designated size in March grew by 4.5% year-on-year, slowing down by 2.5 percentage points compared to January-February. The Purchasing Managers' Index (PMI) for China's manufacturing industry released by the National Bureau of Statistics in March was 50.8%, an increase of 1.7 percentage points from the previous month, returning to the prosperous interval above 50% after five months.
CICC Macro pointed out that the manufacturing PMI in March rose above the seasonal level to 50.8%, showing that the improvement in manufacturing has accelerated on a month-on-month basis. However, the fading of temporary factors such as leap years, combined with the increase in the base due to the rush to work after the epidemic last year, has affected the year-on-year growth rate of industrial value added. Looking at high-frequency start-up rate data, the year-on-year growth rate has also declined in most cases.From the perspective of demand, after the concentrated release of consumption demand brought about by the Spring Festival holiday, post-holiday consumption activities have shown a natural decline. Due to the high base last year influenced by the release of consumption demand after the epidemic, in March, the total retail sales of consumer goods increased by 3.1% year-on-year, slowing down by 2.4 percentage points compared to January-February.
In terms of investment, in the first quarter, the national fixed asset investment (excluding rural households) was 10.0042 trillion yuan, a year-on-year increase of 4.5%, which accelerated by 1.5 percentage points compared to the whole year of the previous year; excluding real estate development investment, the national fixed asset investment grew by 9.3%. Looking at the fields, infrastructure investment increased by 6.5%, manufacturing investment increased by 9.9%, and real estate development investment decreased by 9.5%.
The acceleration of fixed asset investment growth in the first quarter was mainly supported by the growth in infrastructure and manufacturing investment. With the climate warming and the concentrated start of work after the festival, the construction progress of construction projects in various places has accelerated, and infrastructure investment has picked up speed. Driven by fundamental factors such as exports and profits, manufacturing investment has also maintained a relatively high growth rate.
The additional 1 trillion yuan of government bonds issued at the end of last year provided relatively abundant funds for infrastructure projects across the country, driving the acceleration of infrastructure investment growth. Wu Chaoming, Deputy Dean of the Finance and Credit Research Institute, said that given the current complex and severe external environment and insufficient domestic effective demand, infrastructure investment still needs to maintain a certain intensity. The additional issuance of trillion yuan of special government bonds and the subsequent possible introduction of quasi-fiscal tools can provide additional financial support for infrastructure investment, and the growth rate of infrastructure investment this year can reach around 8%.
Zhao Wei, Chief Economist of Guojin Securities, said that the intensity of fiscal and financial policies in the second quarter may be marginally increased, and the effects of previous policies are expected to be concentrated in the peak season of construction, with the acceleration of the implementation of "ultra-long-term special government bonds" and "three major projects", and the acceleration of the layout of local industrial projects, in conjunction with a new round of large-scale equipment renewal and the replacement of consumer goods with old ones, which may further drive the growth rate of fixed asset investment to rise.