July Macro Data Forecast: Industry and Consumption Stabilized and Rebounded, Price Increases May Fall
In July, the macro data forecast for China’s economy indicates stabilization and rebound in the industry and consumption sectors. It is expected that the growth rate of industrial added value will rebound from 4.4% to around 4.8%. The official manufacturing Purchasing Managers’ Index (PMI) also rebounded from 49.0% in May to 49.3%, indicating a slowing contraction rate. The production index slightly dropped, but the new order index rose, showing signs of improvement.
The operating rates of various industries also increased, including semi-steel tires, all-steel tires, blast furnaces, rebars, and automobile tire-related industries. This rebound in operating rates is driven by stabilization in domestic demand, which has led to the resumption of manufacturing production.
Commodity prices are also expected to support the mining industry’s production. The hydropower thermal combustion industry will experience a boost due to the summer peak and increased electricity demand. Consequently, industrial production is expected to accelerate in July, with the year-on-year growth rate rising to around 4.8% from 4.4%.
In terms of investment, the growth rate of fixed asset investment from January to July is forecasted to fall from 3.8% to about 3.5%. Infrastructure investment is expected to drop from 7.2% in the first half of the year to around 7.0%. Unfavorable factors like high temperature and rain slowed down construction progress in July. However, manufacturing investment is expected to rebound from 6.0% to around 6.2%. Manufacturing companies have shown improvement in the first half of the year, with a narrowing decline in total profits and capacity utilization rate and producer price index (PPI) rebounding. This improvement will drive manufacturing investment growth.
Investment in real estate development is anticipated to expand from -7.9% to around -8.0%. Despite a decline in the base compared to the same period last year, the decline in development investment is expected to continue due to a cooling property market and weak consumption of furniture and building materials related to real estate.
In terms of consumption, the growth rate of total retail sales of consumer goods is projected to rebound from 3.1% to around 4.0%. The summer vacation season has led to increased leisure consumption and tourism travel, along with the effects of consumption-promoting policies. Major industries related to residents’ travel, such as transportation, accommodation, and catering, have shown increased activity. Automobile sales have also turned from negative to positive, driven by residents’ enthusiasm for summer travel.
However, the property market continues to cool down, affecting overall consumption of furniture and building materials. On the other hand, increased prices of domestic refined oil products are expected to pick up consumption, and hot weather will drive the growth of home appliance consumption.
In terms of foreign trade, exports are projected to have a year-on-year decrease of -11.9% in July, imports -5.1% year-on-year, with a trade surplus of US$72 billion. External demand has shown differentiation, with manufacturing PMIs of countries like the United States, Europe, and Japan experiencing fluctuation. Different ASEAN countries saw variations in their PMIs, and both South Korea and Vietnam continued to have declining exports in July.
Global commodity prices rebounded in July, which will reduce the negative impact on the year-on-year growth rate of import and export value. Nevertheless, China’s foreign trade still faces significant pressure due to sluggish external demand and high base from the same period last year.
Regarding prices, the Consumer Price Index (CPI) is expected to fall from 0 to -0.4% in July, while the Producer Price Index (PPI) is expected to narrow from -5.4% to -4.3%. The bottom of pork prices appeared in July, leading to a small positive contribution to food prices. However, other meats, fresh vegetables, and fruits have experienced declines in prices. Non-food prices may rise due to increased international oil prices and high-temperature weather leading to higher residential electricity consumption. Service prices may also see an increase due to the pickup in residents’ service consumption. However, the real estate market remains sluggish, and rent prices may not rise significantly. Non-food consumer goods may still be weak, with clothing prices discounted and a decline in residents’ income.
This forecast is based on various indicators, high-frequency data, and trends in different sectors. While there are positive signs of stabilization and rebound, challenges remain in foreign trade and the real estate market. The impact of external factors, such as global commodity prices and differentiated external demand, also needs to be considered. Overall, the forecast suggests a moderate recovery in the Chinese economy in July.