How to view the economic data for the first quarter?

Summary

First, the actual GDP in the first quarter grew by 5.4% year-on-year, and the nominal GDP grew by 4.6% year-on-year, slightly higher than our model predictions of 5.32% and 4.49%. The economy started well in 2025, initially reflecting the positive effects of policies since "924", while also reserving some buffer for the annual economic growth target.

Second, the per capita disposable income and per capita consumption expenditure of residents grew by 5.5% and 5.2% year-on-year in the quarter, respectively, indicating a significant increase in residents' spending propensity. From the perspective of the current consumption expenditure cycle, it peaked in the second quarter of 2021 and experienced the first wave of decline; the second wave of decline began in the second quarter of 2023 and is expected to bottom out in the third quarter of 2024, with a bottom growth rate of 3.5%. There was a preliminary rebound in the fourth quarter of last year and the first quarter of this year. We understand that the first wave of decline was mainly due to the adjustment of the real estate market affecting household balance sheets; the second wave of decline was compounded by the impact of early mortgage repayments. The current rebound benefits from the policy dividends of adjusting existing mortgage rates and the impact of consumption-promoting policies since "924". The above rhythm should provide some insights into our understanding of consumer assets.

Third, the overall economy in March was relatively active, with the six major data indicators (industry, services, exports, consumption, investment, real estate sales) showing varying degrees of year-on-year growth compared to January and February. From the clues behind the data, first, March saw significantly strong exports, with enterprises possibly engaging in a certain "rush to export" phenomenon due to uncertainty, further driving the industrial sector; second, March saw an improvement in real estate sales, coupled with a rise in "trade-in" for durable goods, further boosting the household sector.

Fourth, the industrial added value in March grew by 7.7% year-on-year, the highest since July 2021. The high growth rate of 7.7% year-on-year in export delivery value indicates clues driven by exports. From the perspective of the output of major industrial products, those with double-digit growth rates mainly include new energy vehicles, metal cutting machine tools, solar cells, and industrial robots, while those with high single-digit growth rates mainly include integrated circuits and smartphones. Among traditional products, the growth rate of steel is relatively high, while that of cement is relatively low; we understand that the former is mainly driven by manufacturing-derived demand, while the latter indicates that demand in the construction industry has not yet significantly started.

Fifth, the year-on-year growth of social retail sales in March was 5.9%, higher than last year's annual growth of 3.5% and the 4.0% growth in the first two months of this year. A noteworthy detail is that since the second half of 2023, the growth rate of urban consumption has been consistently lower than that of rural consumption, with March this year being the first time it reversed, which may be related to the impact of the reduction in existing mortgage rates. Among major consumer goods, those with relatively high year-on-year growth rates include home appliances (35.1%), furniture (29.5%), mobile phones (28.6%), sports and entertainment products (26.2%), cultural and office supplies (21.5%), and gold and silver jewelry (10.6%). We understand that the clues behind this are the policy dividends of "trade-in", the impact of active second-hand housing transactions, the rebound in government consumption and community consumption expenditure, and the upward price movement of products like gold. Although other categories have relatively low absolute growth rates, most have improved compared to last year's growth rates, such as automobiles, which also rebounded to a year-on-year growth of 5.5% in a single month

Sixth, fixed asset investment in March increased by 4.3% year-on-year, higher than last year's annual rate of 3.2% and the 4.1% in the first two months of this year. Among them, manufacturing investment has consistently remained above 9% year-on-year for a single month, with equipment upgrades being a driving force, as the growth rate of equipment and tool investment in the first quarter reached 19%, faster than last year's growth rate; real estate investment is still hovering around a low of -10%. Large-scale infrastructure investment increased by 12.6% year-on-year for a single month, indicating that power investment remains under a relatively high trend growth rate. Narrow infrastructure investment (excluding power) was 5.9% year-on-year for a single month, better than previous periods, but its supporting role still needs to be enhanced. Among them, local infrastructure represented by roads and public facility management has improved, but the high growth of railway investment last year has seen a significant decline in growth rate in the first quarter of this year.

Seventh, real estate sales continued to improve in March. Although the sales area is still in the negative growth range year-on-year, the decline has narrowed compared to January-February (-5.1%) and last year (-12.9%). There is some differentiation on the investment side, with both new construction and completions improving, while construction is weaker than previous values. We understand that real estate investment needs to be driven by destocking, such as the acquisition of existing homes. The month-on-month trend of housing prices is generally stable, with first-tier cities experiencing a rebound, showing positive growth for the fourth consecutive month; second-tier cities continue to show zero month-on-month growth; third-tier cities continue to show a negative growth of around -0.2%, with prices continuing to decline.

Eighth, the marginal changes since the second quarter are worth noting. In early April, the U.S. implemented tariffs on overseas goods, and in the coming period, the decline in exports will constitute a certain degree of drag on economic growth. Trade data platform Vizion shows that in the first week of April, container bookings to the U.S. decreased by 67% compared to the previous week, and container bookings departing from the U.S. decreased by 40%. The exact impact slope still needs to be observed in the subsequent export data for April-May. It can be confirmed that against this backdrop, "domestic demand hedging external demand" remains a key logic, and attention should be paid to the deployment of economic work at the Politburo meeting at the end of April.

Ninth, the rhythm of assets and the economy are not completely aligned, especially under external shocks, asset performance has its empirical rules: financial markets often make a one-time "risk provision," and subsequently reflect the transition from uncertainty to certainty, and then reflect the gradual implementation of counter-cyclical policies. In March, global expectations regarding reciprocal tariffs have already been brewing, with the 10-year Treasury yield and the WIND All A Index reaching peaks on March 17 and 18, respectively, likely incorporating pricing for external disturbances, indicating that the phase of "pricing external shocks and uncertainties" has begun; currently, it should belong to the second phase, with certainty increasing, but some clues such as tariffs on specific industries still need to be observed, leading to differentiation in expectations among industries; subsequently, it is expected to gradually enter the third phase, similar to "924," where the new round of policy warming will provide support and correction for the fundamentals.

Main Text

In the first quarter, actual GDP grew by 5.4% year-on-year, and nominal GDP grew by 4.6% year-on-year, slightly higher than our model predictions of 5.32% and 4.49%. The economy started well in 2025, initially reflecting the positive effects of policies since "924," while also reserving some buffer for the annual economic growth target In the previous report "After Risk Provisioning: Occasional Rebounds and Active Hedging," we pointed out that high-frequency model calculations up to the second week of April show that the actual and nominal GDP growth rates for April are 5.12% and 4.13% year-on-year, respectively, both of which have slowed compared to the first quarter's forecast values (5.32% and 4.49%).

The year-on-year growth rates of per capita disposable income and per capita consumption expenditure for residents in the first quarter are 5.5% and 5.2%, respectively, indicating a significant increase in residents' spending propensity. From the perspective of the current consumption expenditure cycle, it peaked in the second quarter of 2021 and experienced the first wave of decline; the second wave of decline began in the second quarter of 2023 and is expected to bottom out in the third quarter of 2024, with a bottom growth rate of 3.5%. There was a preliminary rebound in the fourth quarter of last year and the first quarter of this year. We understand that the first wave of decline was mainly due to the asset-liability effects on households caused by adjustments in the real estate market; the second wave of decline is compounded by the impact of early mortgage repayments. The current rebound benefits from the policy dividends of adjustments in existing mortgage rates and the impact of consumption-promoting policies since "924." The above rhythm should provide certain insights into our understanding of consumer assets.

From the year-on-year growth rate of residents' consumption expenditure, the first and second quarters of 2021 were 17.6% and 18.5%, respectively, while the third and fourth quarters were 11.5% and 8.6%. In 2022, there was significant volatility, with the first to fourth quarters at 6.9%, -2.4%, 5.5%, and -2.4%, respectively. In the first quarter of 2023, it rebounded to 5.4%, further reaching 11.9% in the second quarter, and gradually declining from the third quarter onward. The third and fourth quarters of 2023 are expected to be 10.9% and 9.1%, respectively. The first three quarters of 2024 are expected to be 8.3%, 5.0%, and 3.5%, respectively. The fourth quarter of 2024 and the first quarter of 2025 are expected to be 4.5% and 5.2%, respectively.

The overall economy in March was relatively active, with the six major data indicators (industry, services, exports, consumption, investment, and real estate sales) showing varying degrees of year-on-year growth compared to January and February. From the clues behind the data, it can be inferred that, first, exports in March were significantly strong, and enterprises may have engaged in a certain "rush to export" phenomenon due to uncertainty, further driving the industrial sector; second, real estate sales improved in March, coupled with an increase in durable goods "trade-in," which further stimulated the residential sector.

In March, exports grew by 12.4% year-on-year, higher than the 2.3% year-on-year growth in January and February. The year-on-year growth of industrial added value in March was 7.7%, higher than the 5.9% in January and February. The year-on-year growth of social retail sales in March was 5.9%, higher than the 4.0% in January and February. The year-on-year growth of the service production index in March was 6.3%, higher than the 5.6% in January and February. The year-on-year growth of fixed asset investment in March was 4.3%, higher than the 4.1% in January and February In March, real estate sales decreased by 1.0% year-on-year, better than the -5.1% year-on-year decline in January and February.

In March, industrial added value grew by 7.7% year-on-year, the highest since July 2021. The same high growth rate of 7.7% in export delivery value indicates clues driven by exports. Among the main industrial products, those with double-digit growth rates include new energy vehicles, metal cutting machine tools, solar cells, and industrial robots, while those with high single-digit growth rates include integrated circuits and smartphones. Among traditional products, steel has a higher growth rate, while cement has a lower growth rate. We understand that the former is mainly driven by manufacturing-derived demand, while the latter indicates that demand in the construction industry has not yet significantly started.

In March, the production of new energy vehicles increased by 40.6% year-on-year, metal cutting machine tools by 23.0%, solar cells by 23.6%, and industrial robots by 16.7%.

In March, the production of integrated circuits increased by 9.2%, and smartphones by 7.0%. In March, steel production increased by 8.3%, and cement production by 2.5%.

In March, retail sales increased by 5.9% year-on-year, higher than last year's annual growth of 3.5% and the 4.0% in the first two months of this year. A noteworthy detail is that since the second half of 2023, urban consumption growth has been consistently lower than rural consumption growth, and March this year is the first time it has reversed, which may be related to the impact of reduced interest rates on existing housing loans. Among major consumer goods, those with high year-on-year growth rates include home appliances (35.1%), furniture (29.5%), smartphones (28.6%), sports and entertainment products (26.2%), cultural and office supplies (21.5%), and gold and silver jewelry (10.6%). We understand that the clues behind this are: first, the policy dividend of "replacing the old with the new"; second, the impact of active second-hand housing transactions; third, the rebound in government consumption and community consumption expenditures; fourth, the upward price trend of products like gold. Although other categories have relatively low absolute growth rates, most have improved compared to last year's growth rates, such as automobiles which also rebounded to 5.5% year-on-year.

Although other categories do not have high absolute growth rates, there has been varying degrees of improvement, such as catering growth of 5.6% year-on-year (last year's growth rate 5.3%), tobacco and alcohol growth of 8.5% (last year's growth rate 5.7%), clothing and footwear growth of 3.6% (last year's growth rate 0.3%), daily necessities growth of 8.8% (last year's growth rate 3.0%), and automobiles growth of 5.5% (last year's growth rate -0.5%).

In March, fixed asset investment increased by 4.3% year-on-year, higher than last year's annual growth of 3.2% and the 4.1% in the first two months of this year. Among them, manufacturing investment has consistently remained above 9% year-on-year, with equipment renewal being a driving force, as the growth rate of investment in equipment and tools in the first quarter reached 19%, faster than last year's growth rate; real estate investment is still hovering around a low of -10%. Large-scale infrastructure investment reached 12.6% year-on-year, indicating that power investment remains under a high trend growth rate In March, narrow-sense infrastructure investment (excluding electricity) year-on-year was 5.9%, better than previous periods, but its supporting role still needs to be enhanced. Among them, the road and public facility management industry, which represents local infrastructure, has improved, but the high growth of railway investment last year has seen a significant decline in growth rate in the first quarter of this year.

In March, fixed asset investment year-on-year was 4.3%, compared to 4.1% in January-February; manufacturing investment year-on-year was 9.2%, compared to 9.0% in January-February; real estate investment year-on-year was -10%, compared to -9.8% in January-February; small-caliber infrastructure investment year-on-year was 5.9%, compared to 5.6% in January-February; large-caliber infrastructure investment year-on-year was 12.6%, compared to 9.9% in January-February.

In March, cumulative year-on-year investment in the railway transportation industry was 0.5% (last year 13.5%), cumulative year-on-year investment in the road transportation industry was -0.2% (last year -1.1%), cumulative year-on-year investment in public facility management was 4.9% (last year -3.1%), and cumulative year-on-year investment in water conservancy management was 36.8% (last year 41.7%).

In March, real estate sales continued to improve. Although the sales area was still in the negative growth range year-on-year, the decline narrowed further compared to January-February (-5.1%) and last year (-12.9%). There was some differentiation on the investment side, with both new starts and completions improving, while construction lagged behind previous values. We understand that the real estate investment side needs to be driven by destocking, such as the acquisition of existing homes. The month-on-month trend of housing prices was generally stable, with first-tier cities experiencing a rebound, showing positive growth for the fourth consecutive month; second-tier cities continued to show zero month-on-month growth; third-tier cities continued to show a negative growth of around -0.2%, with prices continuing to decline.

In March, real estate investment year-on-year was -10%, compared to -9.8% in January-February. The area of new starts in March was -18.1% year-on-year, compared to -29.6% in January-February. The area under construction in March was -31.7% year-on-year, compared to -9.1% in January-February. The area completed in March was -11.5% year-on-year, compared to -15.6% in January-February. The sales area was -1.0% year-on-year, compared to -5.1% in January-February; the sales amount was -1.6% year-on-year, compared to -2.6% in January-February.

In March, the total sources of funds for real estate development year-on-year were -3.9%, compared to -3.6% in January-February; domestic loans year-on-year were 6.1%, compared to -6.1% in January-February; self-raised funds year-on-year were -11.8%, compared to -2.1% in January-February; deposits and advance payments year-on-year were -1.4%, compared to -0.9% in January-February; personal mortgage loans year-on-year were 0.3%, compared to -11.7% in January-February.

In March, the month-on-month price changes for newly built commercial residential properties in first, second, and third-tier cities were 0.1% (previous value 0.1%), 0 (previous value 0 growth), and -0.2% (previous value -0.3%), respectively.

The marginal changes since the second quarter are worth noting. At the beginning of April, the U.S. implemented tariffs on overseas goods, and in the future, a decline in exports will constitute a certain drag on economic growth. Trade data platform Vizion shows that in the first week of April, container bookings to the U.S. decreased by 67% compared to the previous week, while container bookings departing from the U.S. decreased by 40% The exact impact slope remains to be observed in the subsequent April-May export data. What can be confirmed is that, in this context, "domestic demand hedging external demand" remains a key logic, with attention on the political bureau meeting at the end of April regarding economic work deployment.

In the recent report "After Risk Provisioning: Occasional Rebound and Active Hedging," we believe that the systematic "hedging" on the demand side remains a key clue. First, it drives resident consumption, which accounts for about 40% of GDP, forming partial support for manufacturing production capacity; second, it stabilizes the speed of capital formation and investment rate in the Chinese economy by expanding the flexibility of local effective investment and further promoting the stabilization of the real estate market; third, it stabilizes the PPI center and profit margins in the manufacturing sector by optimizing capacity and supply-demand ratios. We can continue to expect the political bureau meeting at the end of April, which is likely to have systematic deployment of policies to expand domestic demand under the current external environment.

The rhythm of assets and the economy is not completely the same, especially under external shocks, asset performance has its empirical rules: financial markets often conduct a one-time "risk provisioning," followed by reflecting from uncertainty to certainty, and then reflecting the gradual implementation of counter-cyclical policies. The global expectations regarding reciprocal tariffs have already been brewing in March, with the 10-year treasury yield and the WIND All A Index forming peaks on March 17 and 18, respectively, which likely includes pricing for external disturbances, indicating that the phase of "pricing external shocks and uncertainties" has already begun; currently, it should belong to the second phase, where certainty has increased, but some clues such as tariffs in specific industries still need to be observed, leading to differentiation in expectations among industries; subsequently, it should gradually enter the third phase, similar to "924," where the new round of policy warming forms support and correction for the fundamentals.

Author of this article: Guo Lei, Source: Guangfa Securities, Original title: "How to View First Quarter Economic Data"

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