GF's Guo Lei: H1 GDP Grows 4.7%, Q2 Prices Turn Positive for the First Time
Taylor Wilson
GF Securities macro chief Guo Lei says H1 real GDP grew 4.7%, within the full-year target band, while Q2 nominal GDP hit 5.9% as the price deflator turned positive for the first time in 13 quarters — but a K-shaped split between industry and services persists, and consumption sits at a four-year low.
Is 4.7% growth actually good or bad?
H1 real GDP grew 4.7% year-on-year — Q1 at 5.0%, Q2 slowing to 4.3%.
This means → the pace tops last year's Q4 reading of 4.5% and stays inside the 4.5%–5.0% full-year target — no stall, but no acceleration either.
Q2 nominal GDP grew 5.9%; the GDP deflator — a broad gauge of economy-wide price changes — rose 1.53%, ending 13 straight quarters of negative readings.
In plain terms = prices finally stopped falling across the board. That matters because nominal growth is what drives corporate profits and tax revenue.
High-tech manufacturing is surging — so why is services lagging?
H1 high-tech manufacturing value-added grew 13.3%, the fastest since 2022, led by IC and auto exports.
But industry and services are diverging in a K-shape: industrial value-added rose 5.4%, while the services production index managed only 4.8% — a four-year low.
This means → industry runs on external demand (exports); services run on domestic demand — and domestic demand is the weak link. H1 fixed-asset investment fell 5.7% y/y, and consumption grew just 1.3%, dragging producer services and consumer services respectively.
In plain terms = exports keep the factories humming, but there isn't enough spending or investment at home to feed the service sector.
How low has capacity utilization dropped — and who is idling?
Q2 industrial capacity utilization fell to 73.0%, the lowest since Q2 2020; Q1 was 73.6%.
The gap across sectors is stark: AI-linked computer and electronics held a relatively high 78.7%; electrical machinery sank to 70.3%, a post-2020 low; autos hit 70.8%, below last year's full-year 73.2%.
This reflects an unresolved supply-demand mismatch in new-energy and auto industries — capacity was built, but demand has not kept pace.
Where are households spending — and why is consumption so weak?
H1 per-capita real consumption spending grew only 2.7%; for urban residents, just 2.0% — both four-year lows.
Guo Lei's read: households are deleveraging in housing (actively paying down mortgages), consistent with mortgage-loan data; at the same time they are cutting discretionary spending while protecting necessities.
The numbers bear this out: food & tobacco spending rose 4.2% y/y, clothing 4.4% — both above last year's pace. But housing-related spending grew only 1.4%, transport & telecom 4.7%, and education & entertainment 4.9% — all below last year.
In plain terms = meals and clothes can't be skipped; mortgages and fun can be trimmed — a textbook deleveraging consumption profile.
Did June data stabilize? Is real estate still dragging?
Several June readings improved at the margin: industrial value-added 5.3% (prev. 4.5%), exports 27.0% (prev. 19.4%), retail sales 1.0% (prev. −0.6%).
But the industrial sell-through rate kept sliding to 95.5%, falling every month from April to June. This means → output is recovering, but inventory is piling up too, capping the room for further improvement.
Property is mixed: June floor-space sold fell 14.2% y/y; property investment dropped 24.1% — still deep contraction. Yet tier-one city new- and second-hand home prices have posted small month-on-month gains for four consecutive months, showing early stabilization.
Within retail, K-shaped patterns persist: telecom-device sales +16.5%, cosmetics +12.6%, while auto retail −16.1% and home appliances −8.7%.
What matters in H2? What are Guo Lei's four key calls?
Call 1: Headline growth is inside the target band. Policy is expected to accelerate deployment of already-budgeted resources, focusing on structural weak spots.
Call 2: The K-shaped divergence persists. Targeted measures are needed to boost demand-side momentum and make growth more broad-based.
Call 3: The consumption center of gravity is still weak, but appears to have troughed for the year — early improvement is visible in categories like food and clothing.
Call 4: Fixed-asset investment is the pivotal H2 variable. If fiscal spending traces a "shallow U-shaped" recovery, investment should theoretically follow — but this remains to be confirmed.
Content is for reference only, not financial advice.