Summary
Event
Comments
Economy is in the process of bottoming out , and the overall environment of inflation is also poor. my country's real GDP grew by 4.9% year-on-year in the third quarter, and an average growth of 4.9% in two years. Judging from the data performance, the economy was still in the bottoming out in the third quarter, and both supply and demand sides performed weakly. In the third quarter, the GDP deflating index was 4.9%, and the deflating index was still higher but slightly lower than in the second quarter. Considering that the price (PPI) of industrial products in the third quarter increased significantly compared with the second quarter, it means that the price environment on the consumer goods side weakened faster, and the overall inflation environment is not ideal.
Manufacturing production has been significantly affected. The policy of ensuring supply and stabilizing prices is taking effect but it needs to be continuously put into effect, but it will take some time for the complete recovery of supply. Under the influence of many factors, manufacturing production was significantly affected in September, while the mining industry, electricity, heat, gas and water production and supply industry supply have gone against the trend, indicating that the policy of ensuring supply and stabilizing prices has begun to play a role, and the supply constraint environment is improving. The power supply may remain relatively tight throughout the fourth quarter, and it will take a certain amount of time to fully recover the supply.
investment has improved to a certain extent overall, real estate investment has remained at a certain level but continued to decline, infrastructure investment is still relatively weak, and manufacturing investment is in a stable recovery channel. 9 fixed asset investment increased by 0.17% month-on-month, lower than the month-on-month growth rate of about 0.4% before the epidemic. Asset investment is relatively weak overall, but it performs better than the average of the previous three months, indicating that there is some improvement. Real estate investment remained at a certain level in September but continued to slow down, infrastructure was still weak; manufacturing investment improved for two consecutive months.
consumption performance is still weak, but it has improved month-on-month. High leverage and a decline in income growth will restrict the subsequent consumption level of residents in , and require government consumption support. From a structural perspective, service consumption is the focus of efforts. 9 social consumption growth rate on the month-on-month growth rate of 0.3%, still lower than the average month-on-month growth rate in 2019 (0.7%). The overall consumption is still in a weak trend, but it has improved to a certain extent compared with August. Disposable consumption has improved, and service consumption has improved significantly, but the gap is still large compared with the pre-epidemic level, which is the most important reason for the current unsmooth consumption recovery. Resident consumption may still be relatively weak in the short term, and consumption recovery will still rely more on government consumption in the short term, and the focus should be mainly on service consumption.
Bond Market Views
The important factors that affect the trend of the bond market in the future. In terms of fundamentals, the economy is currently in the bottoming stage, but the policy is in the stage of accelerating efforts. We believe that the next stage of monetary policy will be stable, that is, the MLF interest rate is difficult to change, the DR007 interest rate will continue to fluctuate with the 7D OMO interest rate as the center, and the bottom-up role of fiscal policy on the economy will gradually emerge. For subsequent bond investment, investors are advised to maintain rational expectations of fundamentals and macro policies and continue to maintain the thinking of mean reply.
Risk warning
The epidemic has been repeated recently, and uncertain factors for subsequent global economic recovery still exist; the domestic economy is still in the process of recovery, and the derivative risks brought by the epidemic cannot be ignored.
, event
0On October 18, 2021, the National Bureau of Statistics released economic data for the third quarter and September 2021:
1) Real GDP in the third quarter increased by 4.9% year-on-year (7.9% in the second quarter), a month-on-month increase of 0.2% (1.3% in the second quarter);
2) In September, the industrial added value of above scale increased by 3.1% year-on-year, and the previous value was 5.3%;
3) National fixed asset investment increased by 7.3% year-on-year (8.9% in the previous value);
4) The total retail sales of consumer goods in September increased by 4.4% year-on-year (2.5% in the previous value).
, comments
.1. The economy is in the bottoming process, and the inflation environment is also overall poor
Preliminary calculations, my country's real GDP grew by 4.9% year-on-year in the third quarter (18.3% and 7.9% respectively in the first quarter and the second quarter respectively), and an average growth of 4.9% in the two years (the average growth rate in the first quarter and the second quarter was 5.0% and 5.5% respectively). Judging from the data performance, the 4.9% growth rate in a single quarter is also lower than the market expectations (the market expectations calculated by Wind are 5.5%).Overall, the economy was still in the bottoming out in the third quarter, with weak performance on both sides of supply and demand, and the inflation environment was also poor:
According to the growth rate data, 's real GDP growth rate in the third quarter was 4.9%, and the average growth rate in the two years was 4.9% (0.6 percentage points lower than in the second quarter). The 4.9% quarterly growth rate is also a historical low after excluding the 2020 data since the 21st century (excluding the 2020 data is because this period is hit by the epidemic and recovered) From a month-on-month perspective, the month-on-month growth rate of real GDP in the third quarter was only 0.2% (0.4% and 1.3% in the first quarter and the second quarter respectively). Excluding the first quarter of 2020 data, the month-on-month growth rate is also the lowest level in recent years.
From the perspective of the structural performance of the supply and demand end, the current fundamentals of show a weak supply and demand situation (the demand end was mainly weak in the second quarter), and we will develop in detail in the future. In terms of nominal economic growth rate, the nominal GDP growth rate in the third quarter was 9.8% (13.6% in the second quarter), and the GDP deflating index was 4.9%. The deflating index is still relatively high, reflecting a high inflation level, but it is slightly lower than 5.7% in the second quarter. Considering that the price (PPI) of industrial products in the third quarter increased significantly compared with the second quarter, it means that the price environment on the consumer goods side has weakened faster, and the overall inflation environment is not ideal.
Looking forward to the future, the inflation environment is currently poor (high on the industrial product side, but weak on the consumer product side), exports excluding price factors are actually weakening, the endogenous driving force of the economy is insufficient, the economy is still in the bottoming process, and macro policies need to support it.
.2. Manufacturing production has been significantly affected. The policy of ensuring supply and stabilizing prices is taking effect but it is necessary to continue to make efforts. However, it will take a certain time for the full recovery of supply to be fully
9 September to increase the added value of industrial enterprises above designated size by 3.1% year-on-year (the previous value was 5.3%), an increase of 10.2% over the same period in 2019, and an average increase of 5% in two years (the previous value was 5.4%); a month-on-month increase of 0.05% (the previous value was 0.31%). From January to September, the added value of industrial enterprises above designated size increased by 11.8% year-on-year (the previous value was 13.1%), and the average growth in the two years was 6.4% (the previous value was 6.6%).
According to the data, although the supply growth rate is roughly still in the slowdown channel, under the influence of insufficient supply of coal and other related commodities , and other factors such as pull-off power limit, industrial production was significantly affected in September, and the growth rate dropped rapidly. But as we mentioned in "The difference between manufacturing demand and service industry demand, slowing down the recovery speed - June 2021 PMI data review and bond market view", the impact on the supply side is strong, but it is a short-term constraint. In the current environment, weakness on the demand side is the main contradiction in the economy. It is necessary to combine the demand data to better observe the industrial production situation in September. The indications that pure supply data can provide are not strong.
From the perspective of category, manufacturing production was significantly affected in September, which was the main reason for the rapid decline in industrial production. The supply of electricity, heat, gas and water production and supply in mining industry has been against the trend. Judging from the monthly growth rate, the added value of the mining industry increased by 3.2% year-on-year in September (2.5% in August), the added value of the manufacturing industry increased by 2.4% year-on-year (5.5% in the previous value), and the added value of the electricity, heat, gas and water production and supply industry increased by 9.7% year-on-year (6.3% in the previous value). From a structural perspective, manufacturing production is the most affected by the power limit of the tension switch. Driven by the policy of ensuring supply and stabilizing prices, the supply of the mining industry, electricity, heat, gas and water production and supply industries have rebounded, which also indicates that the policy of ensuring supply and stabilizing prices has begun to play a role, and the supply constraint environment is improving.
From the perspective of manufacturing production structure, industries with high power consumption and energy consumption such as textile industry, ferrous metal smelting, rolling processing industry, automobile manufacturing industry are significantly affected, while automobile manufacturing industry also has a weak demand trend, which is manifested as the added value of automobile manufacturing in September fell by 8.2% year-on-year, declining for six consecutive months, and the growth rate from June to September was negative.
Judging from the current situation, factors such as coal shortage will continue for a while. The power supply may remain relatively tight throughout the fourth quarter, and it will take a certain amount of time to fully recover the supply.
.3. Overall investment has improved to a certain extent. Real estate investment has remained at a certain level but continued to decline. Infrastructure investment is still relatively weak. Manufacturing investment is in the channel of stabilization and recovery.
1-September national fixed asset investment was 39.8 trillion yuan, a year-on-year increase of 7.3% (the previous value was 8.9%). The high reading effect brought by the base effect is still relatively obvious (the cumulative growth rate of fixed asset investment from January to September 2020 was 0.8%). Judging from the average growth rate in the two years, fixed asset investment from January to September 2021 increased by 7.7% compared with January to September 2019 (down 0.5 percentage points relative to January to August), and the average growth in the two years was 3.8% (down 0.2 percentage points relative to January to August).
In 2018 and 2019 before the epidemic, the growth rate of fixed asset investment was 5.9% and 5.4% respectively, and the current average growth rate of 3.8% in the two years is lower than the overall level before the epidemic. The current investment can still be judged based on the month-on-month growth rate.
On the one hand, fixed asset investment in September increased by 0.17% month-on-month, which was lower than the month-on-month growth rate of about 0.4% before the epidemic, indicating that fixed asset investment was relatively weak overall; on the other hand, fixed asset investment in June, July and August were 0.14%, 0.08%, and 0.18% respectively (the average is 0.13%), and the month-on-month growth rate in September was 0.17%, which was better than the average of the previous three months, indicating that fixed asset investment has improved a certain extent overall.
From the perspective of sub-items, real estate investment remained at a certain level in September but continued to slow down, infrastructure was still weak; manufacturing investment has improved for two consecutive months.
preliminary estimates that in September 2021, investment in real estate, manufacturing and infrastructure increased by -3.5%, 10% and -4.6% compared with September 2020 (the previous values were 0.3%, 7.2% and -6.5%) respectively. Judging from the data, real estate investment has declined, and the growth rate of broad infrastructure investment has continued to be negative, and manufacturing investment has improved. In order to better eliminate the impact of the low base last year, we will still observe the growth of the three major categories of fixed asset investment based on the average growth rate of two years. According to preliminary estimates, real estate, manufacturing and infrastructure investment in September 2021 increased by 8.1%, 13.3%, and -0.1% compared with September 2019 (the previous value was 12.1%, 12.5%, and 0.04%), with an average growth rate of 4.0%, 6.4% and -0.05% (the previous value was 5.9%, 6.1% and 0.02%), respectively. Real estate investment remains at a certain level but is in a continuous decline channel, and the growth rate of manufacturing investment has increased (related to the low base of manufacturing investment in September 2019), and infrastructure investment is still relatively weak.
Combined with the annual year-on-year and two-year average growth rates of fixed asset investment in recent months:
Real estate investment has declined continuously since July under the background of strict supervision, and the subsequent growth rate is unlikely to be very good;
manufacturing investment is in a stable recovery channel as a whole, indicating that after 4 consecutive quarters of leverage in , the balance sheet of industrial enterprises has reached a certain level of repair, and we need to pay attention to the impact of exports and costs at high levels in the future;
infrastructure investment is still weak, and together with real estate investment, it is an important reason to drag down the decline in fixed asset investment, and policy support is needed in the future.
.4. Consumption performance is still weak, but it has improved month-on-month. High leverage and the decline in income growth will restrict the subsequent consumption level of residents and require government consumption support. From the structural point of view, service consumption is the focus of efforts.
1-September retail sales of consumer goods was 31.8 trillion yuan, a year-on-year increase of 16.4%; in September, the year-on-year growth rate of social consumption was 4.4% (the previous value was 2.5%), an increase of 1.9 percentage points, an increase of 7.8% from September 2019 (the previous value was 3%), and the average growth rate in the two years was 3.8% (the previous value was 1.5% in August). Compared with the growth rates of 9.7% and 8.2% (nominal) in 2018 and 2019, the average growth rate of social consumer goods in the two years was lower; the total retail sales of social consumer goods in September grew by 0.3% month-on-month (up from August), but it was still significantly lower than the average month-on-month growth rate of 2019 (0.71%). The overall consumption of is still in a relatively weak trend, which is also an important reason why the market believes that the economic recovery is insufficient, but from a comparison with August, consumption in September has improved to a certain extent.
consumption currently accounts for the highest proportion of the entire economic structure and is an endogenous driving force. Therefore, the recovery of consumption determines the final performance of fundamentals.For the performance of subsequent consumption, we can observe from two different structural dimensions.
From the perspective of consumer subjects, social consumption consists of two parts: residents' consumption and government consumption. In terms of government consumption, it depends on the fiscal expenditure. At present, it is a natural thing to increase expenditure in the subsequent fiscal policy. In terms of residents' consumption, in many previous reports, we pointed out that the outbreak of the epidemic has caused the leverage ratio of residents to continue to rise, while the slowdown in income growth and the rise in housing prices have restricted the recovery of residents' balance sheets. Therefore, the weakness of consumer product CPI, especially the core CPI of , and the continued recovery of consumption has been lower than expected since this year, are all manifestations of poor balance sheet repair of residents. In Q1 and Q2 this year, the leverage ratio of the residents' sector declined slightly (related to economic growth), but the repair of residents' balance sheet may just begin. We believe that this will restrict the recovery speed of residents' consumption as a whole. We expect that in the short term, the weak performance of residents' consumption and consumption-side inflation will continue. In addition, judging from , the growth rate in the third quarter slowed down to a certain extent, which will also restrict the recovery of subsequent consumption.
From the perspective of consumer goods, optional consumption has improved, and service consumption has improved significantly, but the gap is still large compared with the pre-epidemic level, which is the most important reason for the current unsmooth consumption recovery. In our previous economic data comments, we pointed out that different consumer varieties are affected by the epidemic differently, and the impact of changes in income on them is also different. We distinguish consumer goods into necessary consumption, optional consumption and service consumption, and use grain, oil and food to indicate necessary consumption, automobiles, gold, silver and jewelry, communication equipment and home appliances to indicate optional consumption, and catering to indicate services.
We calculated the two-year average growth rate of each industry. In September, all consumption, including grain, oil, food, automobile, gold, silver and jewelry, communication equipment, home appliances, and catering industries, were 3.8%, 8.5%, -1%, 16.5%, 8.2%, 3%, 1.2% (1.5%, 6.8%, 1.7%, 11.3%, 3.2%, -0.5%, and -5.6% in August). Compared with August, it can be seen that except for automobile consumption, all other items have risen to a certain extent (in August, except for gold, silver and jewelry consumption, all other items have declined to a certain extent, among which consumption in automobiles, home appliances and catering industries has declined significantly). Judging from the data performance, the necessary consumption has generally returned to the pre-epidemic level, and the optional consumption is also improving, while the service consumption has improved significantly, but compared with the growth rate of about 9-10% before the epidemic, the gap is still large.
combined with the above two dimensions, it can be roughly seen that under the background of epidemic prevention and control and repeated epidemics, residents' consumption is still relatively weak in the short term, and the overall recovery of consumption will still rely more on the efforts of government consumption in the short term, and the focus of efforts should be mainly on service consumption.
bond market view
Retrace the trend of the bond market since the third quarter of this year. In terms of the capital market, since February this year, DR001 and DR007 have been in range changes overall; in terms of treasury bond yields, since mid-August, long-term and short-term interest rates have risen to a certain extent. On October 15, the maturity rate of 1Y varieties was 2.34%, an increase of 21bp from the low of 2.13% in early August, but it has not fluctuated much since mid-September; after the National Day holiday, the long-term interest rate has risen considerably, and on October 13, the maturity rate of 10Y varieties was 2.97%, an increase of 17bp from the low of 2.80% in early August.
is an important factor that will affect the bond market trend in the future. In terms of fundamentals, the economy is currently in the bottoming stage, but the policy is in the stage of accelerating efforts. On September 27, the Central Bank's Monetary Policy Committee held a regular meeting for the third quarter, pointing out that the prudent monetary policy of should be flexible, precise, reasonable and moderate, maintain a reasonable level of liquidity, enhance the stability of the growth of total credit, maintain the growth rate of money supply and the growth rate of social financing scale, and basically match the nominal economic growth rate, and maintain the basic stability of the macro leverage ratio. In terms of fiscal policy, the supply of government bonds has accelerated since late July, and fiscal expenditure has also accelerated significantly since August. There is a high possibility of continued acceleration in the future, and the role of fiscal policy in supporting the economy will gradually emerge.We believe that the next stage of monetary policy will be stable, that is, the MLF interest rate is difficult to change, the DR007 interest rate will continue to fluctuate with the 7D OMO interest rate as the center, and the bottom-up role of fiscal policy on the economy will gradually emerge.
Therefore, for subsequent bond investment, we recommend that investors maintain rational expectations for fundamentals and macro policies and continue to maintain the thinking of mean reply.
This article is derived from Fixed Income Research
