The highly anticipated macroeconomic data for May, which has garnered significant market attention, is set to be released to the public on June 17th.

Institutional analysis suggests that factors such as the "May Day" holiday and the low base effect will drive a recovery in domestic consumption in May. However, the year-on-year growth rate in industrial production and investment may decline. The incremental policies for the real estate sector have not yet taken effect, and related investments continue to be sluggish. With the support of policies such as large-scale equipment upgrades, the growth rate of manufacturing investment has maintained its resilience.

The latest "First Financial Chief Economist Confidence Index" published by the First Financial Research Institute stands at 50.23, which is lower than the previous month but still above the 50 boom-or-bust line. Economists believe that the macroeconomy is still in the process of recovery, and future attention should be paid to the effectiveness of policy implementation and the recovery of demand. With the government increasing its investment in infrastructure and the modernization of the manufacturing industry, as well as a series of policies to stimulate economic growth gradually taking effect, it is expected that the economy will continue to improve in the second half of the year.

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Industrial growth may slow down.

The first financial survey results show that the predicted average year-on-year growth rate of industrial value-added in May is 5.99%, lower than the published value of 6.7% in April.

Looking at leading indicators, the level of manufacturing prosperity has declined due to factors such as the high base formed by the rapid growth of the manufacturing industry in the previous period and insufficient effective demand. Data released by the National Bureau of Statistics on May 31st, 2024, shows that China's manufacturing Purchasing Managers' Index (PMI) for May 2024 was 49.5%, a decrease of 0.9 percentage points from the previous month, falling below the boom-or-bust line again after two months.

Zhang Liqun, a special analyst of the China Federation of Logistics and Purchasing, believes that the PMI index in May has returned below the boom-or-bust line, which is not only due to the impact of the "May Day" holiday on the sequential data but also indicates that the economic recovery momentum is still insufficient. It is crucial to pay close attention to the weakening expectations caused by insufficient demand and the trend of declining production and investment activities.

A report released by the National Economic Research Center of Peking University points out that policies such as stabilizing growth, promoting investment, and expanding domestic demand continue to provide support. At the same time, with a significant rebound in overseas exports, the profits of industrial enterprises are growing steadily, industrial demand is gradually recovering, and the overall operation rate of the industry remains at a reasonable and moderate level. The industrial economy as a whole is in a recovery phase. It is expected that the industrial value-added in May 2024 will grow by 6.5% year-on-year, a decrease of 0.2 percentage points from the previous period.

Lu Zhengzhi, Chief Economist of Industrial Bank, said in his participation in the first financial chief survey that in May 2024, the start-up rates of major industrial products showed differentiation. The profit of rebar on the plate increased slightly under the combined effect of supply disturbance and improved demand expectations, and the output of crude steel also rose slightly; after the "May Day" holiday, the start-up rate of tires rebounded to a higher level, with semi-steel tires still better than full-steel tires; the start-up rate of the PTA industry chain is still high overall, but slightly lower than in April; the daily consumption of coal turned from positive to negative year-on-year; the real estate data is still relatively weak. Considering the base of last year, it is expected that the industrial value-added in May will decrease by 1.2 percentage points year-on-year compared to the previous month.

Lu Ting, Chief Economist of Nomura China, is more optimistic in his forecast. He believes that the reduction of the base and the push of export demand will further improve production activities, and the industrial value-added in May is expected to grow by 6.3% year-on-year. Looking at high-frequency data, the weekly start-up rate of cement in May rebounded, and the weekly output of rebar by major steel mills narrowed the year-on-year decline.Consumer Spending Growth Expected to Accelerate

With the improvement in the employment situation and the rebound in residents' willingness to consume, coupled with the "May Day" holiday effect driving the release of demand, the growth rate of consumer spending in May is expected to significantly accelerate. Economists participating in the First Financial Chief Research Survey predicted an average year-on-year growth rate of 3.41% for the total retail sales of consumer goods in May, higher than the 2.3% year-on-year growth rate in April.

Wen Bin, Chief Economist at Minsheng Bank, analyzed that, looking at the main commodities, the business activity index for the service industry in May was 50.5%, an increase of 0.2 percentage points from the previous month. Among them, the business activity index for the retail and catering industries increased to varying degrees from the previous month, while the business activity index for the postal, cultural, sports, and entertainment industries was above the high prosperity range of 55.0%. During the "May Day" holiday, the number of domestic tourism trips nationwide increased by 28.2% compared to the same period in 2019, and the average expenditure per trip increased by 13.5% compared to the same period in 2019.

Data from the Ministry of Culture and Tourism shows that during this year's "May Day" holiday, the total number of domestic tourism trips nationwide reached 295 million person-times, a year-on-year increase of 7.6%, and an increase of 28.2% compared to the same period in 2019 on a comparable basis; the total expenditure for domestic tourists' trips was 166.89 billion yuan, a year-on-year increase of 12.7%, and an increase of 13.5% compared to the same period in 2019 on a comparable basis.

Li Chao, Chief Economist at Zheshang Securities, expects a year-on-year increase of 4.5% in the total retail sales of consumer goods in May, an increase of 2.2 percentage points from the previous month. On the basis of a high base last year, the domestic tourism market during the "May Day" holiday in 2024 still shows a stable and rising trend of recovery. Travel data during the holiday period maintained a high level of prosperity, and the sales performance of retail and catering was impressive, with the expectation that consumption with high social attributes such as catering is expected to continue to recover.

In addition, the significant low base effect is also an important factor driving the upward growth of the social retail sales growth rate in May. In May 2023, the total retail sales of consumer goods increased by 12.7% year-on-year, a decline of 5.7 percentage points from April 2023.

The National Economic Research Center of Peking University pointed out that the current economic downward pressure still exists, and the growth rate of residents' income needs to be further improved, becoming a factor that suppresses the growth rate of consumption.

Manufacturing Investment Maintains Resilience

Economists participating in the First Financial Chief Research Survey predicted an average growth rate of 4.13% for fixed asset investment in May, slightly lower than the 4.2% announced data for the previous month.

Chen Xing, Chief Macro Analyst at Caitong Securities, said that, first, the issuance of special bonds in May has accelerated. Looking at the high-frequency data related to infrastructure construction, the year-on-year growth rate of the oil asphalt startup rate has narrowed, and infrastructure investment may have a slight recovery; second, with the continuous optimization of real estate control policies in various regions, real estate investment may stabilize; finally, with the support of policies promoting large-scale equipment updates, the growth rate of manufacturing investment remains stable.In accordance with the initial plan, all additional government bond projects are scheduled to commence construction by the end of June this year. The National Development and Reform Commission stated that it will work with relevant parties to expedite various investment tasks, fully leveraging the significant driving and amplifying effects of central government budgetary investments, local government special-purpose bonds, and the additional government bonds issued in 2023, to actively expand beneficial investments. Industry insiders believe that after the accelerated issuance of government bonds and the accompanying infrastructure loans, the pace at which infrastructure investment translates into physical work volume will quicken, and the related investments are expected to further accelerate.

Wen Bin estimates that the cumulative year-on-year growth of fixed asset investment from January to May will be around 4.0%. Among this, infrastructure investment may rebound from 6.0% to around 6.4%; considering signs of marginal slowdown in exports in May, and the flat cumulative growth rate of profits for manufacturing enterprises from January to April, with the capacity utilization rate remaining at a relatively low level, it is anticipated that the growth rate of manufacturing investment will slightly decrease to around 9.5%; the new real estate policies have not yet significantly boosted market transaction volumes, and the willingness of residents to purchase homes and of real estate companies to acquire land remains weak, leading to an expected expansion of the year-on-year decline in real estate development investment to around 10%.

Cai Wei, Chief Strategy Officer of KPMG China Consulting, believes that looking ahead, with the vigorous implementation of policies such as large-scale equipment upgrades, consumer goods replacement, and ultra-long-term special government bonds, infrastructure and manufacturing investments are expected to continue making positive contributions, and residential consumption may steadily recover. However, the lack of effective demand is a strong constraint on the current economic rebound, highlighting the necessity for policy efforts.

Starting in late May, a series of real estate policy combinations have been intensively implemented, including the removal of the lower limits on commercial personal housing loan interest rates for first and second homes at the national level, the reduction of personal housing provident fund loan interest rates, and the lowering of the minimum down payment ratio for commercial personal housing loans.

Wang Qing, Chief Macro Analyst at Orient Gold & Credit Rating, stated that from the content of the policies, this round of "triple release" is the most forceful in the real estate support policies over the past three years, and it significantly exceeds market expectations, sending a strong signal to support the real estate industry in achieving a soft landing more quickly, and it is expected to have a strong stimulating effect on the housing market in the short term.