Financial Contraction Seriously Dragged The Economy Down.

1-2 months

The performance of the real estate market is weaker than expected. Since March, the seasonal recovery of the economy and real estate has also been slow.

The recovery rate of coal consumption in power generation enterprises is much slower than in previous years.

In the next few weeks after the Spring Festival, the recovery level of real estate sales is roughly the same as that before the festival, significantly lower than the fourth quarter of last year.

2, the performance of real estate prices is also weak in the same month. The price of 70 cities is flat in the negative growth range.

Taking into account the economic stall since August 2014 and the recent economic data disclosed, it seems that the economy might have experienced a financial contraction later last year. It shows that public expenditure and government fund expenditure (or even the government expenditure supported by the financing platform) still lacks reliable data. Meanwhile, it has experienced a substantial contraction. The reasons may be related to anti-corruption and fiscal consolidation policies, and there may also be some policy coordination deviations.

This impact may be causing some secondary impacts, such as the reduction of private investment caused by income deterioration, and the deterioration of expectations will also affect the real estate purchase decisions of residents.

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Some of them are reversible and seem to be subsiding, but the decline in expenditure behavior of government funds and financing platforms may be long-term.

The risk is that this may reverse the situation of supply side contraction since 2013, which has led to the gradual recovery of corporate profits, and once again caused economic slowdown and the deterioration of corporate earnings.

The impact of our rejection of crude oil has also been found to deteriorate in the recent PPI months.

If the government is slow to respond to this, the situation may be even worse.

On the whole, the willingness of the government to take measures to support the economy is obvious.

The recovery and the reduction of local debt risk are conducive to supporting the rise of the market. But in the medium term, we need to be alert to the risks in two areas: first, the valuation bubble generated by the fast rising market, the two is the evolution of the secondary impact of fiscal shocks and policy responses, especially whether this will systematically damage the recovery trend of corporate profits.

The strong rise in US economic experience in the three or four quarter of last year has unsustainable ingredients.

Since last November, the US PMI has fallen rapidly, the industrial chain expansion has stagnated, and other growth figures such as retail sales have weakened.

In the first half of the year, the US economy may be facing the pressure of gradual weakness.

Looking ahead, the impact risk of US interest rate hike still exists.

The market expects the federal funds rate at the end of 2017 to be 1.725, while the Fed's median forecast is 3.125.

The us ten year treasury bond interest rate is below 2%, which means that the market believes that the benchmark interest rate for the medium term will hardly rise to more than 2%.

If the US economy and inflation accelerate significantly in the future, the very slow rise in interest rates is expected to face challenges.