Four Questions about Shanghai's Economic Data in the First Half of the Year: Month on Month | Year on Year | Economy

The operation of Shanghai's national economy in the first half of 2023 was announced on the 20th. According to the Shanghai Municipal Bureau of Statistics, based on the unified calculation of regional GDP, Shanghai achieved a regional GDP of 2139.17 billion yuan in the first half of the year, a year-on-year increase of 9.7% at comparable prices.

This is the first half of the year after three years of the epidemic, when the economic operation gradually returned to normal. According to various data, the market demand in Shanghai gradually recovered in the first half of the year, production and supply continued to increase, employment prices remained generally stable, and the overall economic operation rebounded. However, due to the disturbance of the low base in the same period last year, there is a significant difference between the year-on-year data in the first half of this year and the regular year, which is worth further analysis.

Why is the growth rate so high?

In the first half of the year, Shanghai achieved a year-on-year growth of 9.7% in regional GDP. This is a rare high value in recent years. The growth rate of some sub items is even higher, for example, the secondary industry increased by 15.1% year-on-year. In specific industries, the construction industry increased by 27% year-on-year, while the accommodation and catering industry increased by 41.8% year-on-year.

Such a significant increase in data is not only rare, but may even raise doubts. Is economic growth really so fast?

The abnormal growth rate is actually not difficult to understand. As is well known, in the second quarter of 2022, Shanghai was severely impacted by the epidemic, resulting in negative economic growth. The significant year-on-year increase in data in the first half of this year is mainly due to the low base in the same period last year.

In addition to year-on-year growth, we can also use month on month and two-year average methods to look at the economic growth rate of Shanghai in the first half of this year. The month on month comparison is the second quarter of 2023 compared to the first quarter. If price factors are not considered, the quarter on quarter growth in the second quarter is 3.0%. The two-year average is based on the first half of 2021 and the geometric average is used to determine the growth rate. It is not difficult to find that the average growth rate over the past two years is also significantly lower than 9.7%.

But whether it is year-on-year, month on month, or two-year average growth rate, it can be seen that the Shanghai economy is gradually recovering in the first half of this year. "Compared to last year, the overall vitality is recovering, although there is still some distance from the norm," said Zhan Yubo, a researcher at the Institute of Economics at the Shanghai Academy of Social Sciences and director of the Western Economics Research Office.

Previously, some experts pointed out that it takes time for consumption and economic recovery after the epidemic internationally, and it is generally believed that it will take about a year to return to normal. Including Shanghai, the COVID-19 situation in China has remained stable for only about half a year, and the economic cycle has shown a positive improvement.

Where does growth come from?

From a supply perspective, the impact of the epidemic on the three major industries is uneven, and the growth rate after the epidemic is also uneven.

The second industry, which experienced the largest decline in the first half of last year, also saw the fastest growth in the first half of this year. In the first half of the year, the added value of industries above designated size in Shanghai increased by 14.2% year-on-year; The total output value of industrial enterprises above designated size was 1879.792 billion yuan, a year-on-year increase of 11.8%. In the first half of the year, 28 out of 35 industrial industries achieved year-on-year growth in output value, with a growth rate of 80%. Among them, the automobile manufacturing industry, electrical machinery and equipment manufacturing industry, and general equipment manufacturing industry have grown rapidly, with output values increasing by 21.3%, 37.5%, and 22.7% year-on-year, respectively.

Similarly, in the tertiary industry, the contact aggregation service industry, which has been greatly affected by the epidemic, has also seen a significant rebound. In the first half of the year, the added value of the accommodation and catering industry, transportation, warehousing and postal industry, leasing and business services industry increased by 41.8%, 13.3%, and 12.1% year-on-year, respectively. The primary industry has experienced normal growth in the first half of this year due to minimal impact from the epidemic.

The Chinese economy has shifted from high-speed development to high-quality development. Of course, we still need to pay attention to quantitative growth, but we need to pay more attention to qualitative changes. From the data, it can be seen that Shanghai is accelerating the cultivation of new driving forces for development.

Taking the digital economy as an example, in the first half of the year, the added value of information transmission, software, and information technology services in Shanghai increased by 10.7% year-on-year. From January to May, the city's information transmission, software, and information technology service industries achieved a year-on-year increase of 18.4% in operating revenue. Among them, the operating revenue of the Internet and related services industry increased by 23.8% year on year, thanks to the positive factors of the sustainable development of some e-commerce, takeaway and other platform enterprises; Driven by some application software enterprises, the software and information technology service industry saw a year-on-year increase of 15.0% in operating revenue.

And other aspects of high-quality development, such as improving the urban environment, optimizing the business environment, and promoting technological innovation, may not be directly presented from the data of the first half of the year. And these aspects may be more important than digital growth.

Why is there a gap between my feelings and mine?

The overall economy is recovering, but the feelings of each individual are not the same. Someone asked, why is economic data always different from my subjective feelings? Is the data lying?

If we look at the problem from a different perspective, we will find that everyone's perception of social operation is real, and the data is also real, they are not necessarily contradictory. If we take an analogy, the entire economy is like a big forest. Each of us enters this forest from different positions, some see towering trees, some see flowers and shrubs, some see lush greenery, and some see fallen leaves all over the ground. We are all in the same forest, but our perspectives are different.

Economy is a complex organism, and what each of us feels is only a part of it. As ordinary consumers, what we see the most are the small shops around us, the commercial districts throughout the city, and our own income and expenses. We often evaluate the overall situation based on what we see.

The part we see and feel may not be comprehensive, but it may not necessarily be distorted. For example, the total retail sales of consumer goods closely related to ordinary consumers, although increased by 23.5% year-on-year in the first half of this year, if we calculate the average two-year growth rate, it is only 1.8%. Similarly, based on the two-year average growth rate, the per capita disposable income and per capita consumption expenditure of residents increased by 3.1% and 5.2% respectively. These data all indicate that the willingness and ability of residents to consume need to be improved.

"We should reflect on why there is currently a problem of weakened consumption capacity. Chinese households have long faced the problem of low wages, and wages are not linked to nominal GDP growth. From the perspective of China's future economic development trends, the proportion of government expenditure used for household expenses must be significantly increased." said Zhang Jun, a senior professor of humanities and dean of the School of Economics at Fudan University.

Can you rest comfortably now?

From the data of the first half of the year, it can be seen that all aspects of the national economy are on a recovery curve. But this does not mean that the future will naturally be smooth sailing, nor does it mean that we can "lie down and win". The economic recovery is still facing challenges.

For example, the issue of enhancing the vitality of market entities. Zhan Yubo said, "Although the policies for epidemic prevention and control have been removed, the economy affected by the epidemic cannot quickly return to its original state because many activities have been interrupted during the epidemic, and the supply and demand relationship has been disrupted." After three years of epidemic impact, some market entities are unable to support themselves and eventually withdraw from the market, re enter the market or start a new business, with high costs. The damage to market entities will directly affect employment and purchasing power on the demand side.

For example, the real estate industry is recovering slowly. The drag on real estate development investment is one of the important reasons for the overall slowdown in investment growth. Since 2022, the growth rate of real estate development investment in China has continued to decline, reflecting the lack of recovery in the supply side expansion ability of real estate enterprises. The situation in Shanghai is slightly different from that in the whole country. Due to the impact of last year's low base, the investment in real estate development in Shanghai increased significantly in the first half of this year. But overall, the weakness of the real estate market is similar. The transaction volume of second-hand houses in Shanghai has been declining for three consecutive months, with second-hand house prices falling by 1.2% month on month in June.

Zhan Yubo said, "The development model of real estate in the past has come to an end and structural reforms must be carried out. The central government has seen this very clearly, and regulation has been in place in the past few years. Real estate is different from other industries, and its correlation is too strong. When the brakes are applied, a series of problems will arise. I believe that solving real estate problems requires time for space."

There is also the issue of external demand contraction. According to media reports, due to geopolitical influences, the import volume of the United States from China decreased by 25% year-on-year from January to May this year. In the first half of the year, the proportion of China's imports of US goods is expected to fall from the top for the first time in 15 years. The external environment remains complex and severe, and the downward pressure on overseas economies is increasing, which will have a significant negative impact on China's exports.

In the first half of the year, although the foundation for economic and social recovery and development is still unstable, Shanghai has already embarked on the path of recovery, and the upward trend is clear.