In July, the sales growth of excavators rebounded to double digits, and infrastructure investment in the second half of the year is expected to further warm up.

Excavators are seen as a "barometer" of infrastructure. After experiencing negative growth in May, the latest data released on August 13 shows that excavator sales nationwide improved in July, with a total of 12,346 units sold, a year-on-year increase of 11.0%. Cumulatively, sales for the first seven months also achieved double-digit growth.

Why did the year-on-year growth rate of excavator sales rebound? Industry experts interviewed by the "Daily Economic News" stated that this is closely related to the trend of infrastructure investment in the second half of the year. Judging from recent factors such as the acceleration of special bond issuance, it is expected to leverage more funds and slightly boost infrastructure investment.

Excavator sales in July increased by 11% year-on-year.

On August 13, data from the China Construction Machinery Industry Association showed that a total of 12,346 excavators were sold in July, a year-on-year increase of 11.0%. The 25 main engine manufacturing enterprises included in the statistics sold a total of 149,553 excavators from January to July, with a year-on-year increase of 13.9%.

Compared to May of this year, the sales growth rate of excavators has rebounded. Data from May showed that 18,897 excavators were sold, a year-on-year decrease of 2.2%, while sales in June were 15,121 units, a year-on-year increase of 6.6%.

Luo Zhiheng, assistant director of the Evergrande Research Institute, analyzed for reporters that excavator sales grew rapidly in the first quarter of this year, reaching a year-on-year increase of 24.5%. However, there was negative growth in May. The single-month growth of 11% in July is an improvement compared to May and June, but it has not yet reached the growth rate of the first quarter.

From the perspective of product market structure, small and medium-sized excavators have seen significant growth. In July, large excavators sold 1,720 units, a year-on-year decrease of 3%; from January to July, cumulative sales were 19,006 units, a year-on-year increase of 5.0%. Medium-sized excavators sold 2,741 units in July, a year-on-year increase of 2%; cumulative sales from January to July were 35,206 units, a year-on-year increase of 8.9%. Small excavators sold 5,729 units in July, a year-on-year increase of 17.5%; cumulative sales from January to July were 80,850 units, a year-on-year increase of 15.2%.

It can be seen that small excavators are the fastest-growing among the three types. Luo Zhiheng stated that the significant year-on-year growth in small excavator sales is mainly due to their wide range of applications, with strong demand in rural water conservancy and municipal engineering.

Reporters noted that the excavator market maintained growth in 2018, benefiting from factors such as the replacement of main engines, inventory cycles, increased infrastructure construction, stable real estate investment, clearance of second-hand machines, and recovery of market confidence. The demand for excavators in 2018 continued to grow.

According to industry statistics released by the Excavator Branch of the China Construction Machinery Industry Association, from January to December 2018, the 25 excavator main engine manufacturing enterprises included in the statistics sold a total of 203,420 excavators of various sizes, a significant year-on-year increase of 45.0%.

It is expected that infrastructure investment will rebound from a low level.

Does the hot sales of excavators indicate that infrastructure investment is likely to continue to rise?

Data shows that from January to June, infrastructure investment grew by 4.1%. Many analyses suggest that there may be a low-level rebound in the second half of the year.

Reporters noted that multiple institutions predict that due to the accelerated issuance of special bonds starting in June, infrastructure investment in July is expected to continue its upward trend.

Luo Zhiheng analyzed for reporters that infrastructure is mainly related to fiscal revenue and expenditure. Although this year’s fiscal deficit and the scale of special bonds have expanded, fiscal revenue has also decreased. In the first half of the year, central government general public budget revenue increased by 3.4% year-on-year, tax revenue increased by 0.9%, and land finance revenue decreased significantly. Special bonds can be used as capital for major projects, thereby leveraging more funds. Overall, infrastructure is expected to see a slight rebound, but the rebound may be limited.

Reporters noted that data from the Ministry of Finance showed that in June 2019, local government bonds worth 899.6 billion yuan were issued nationwide. Among them, general bonds amounted to 317.8 billion yuan, and special bonds amounted to 581.8 billion yuan, both significantly accelerated compared to other months in the first half of the year, especially in June, where special bonds accounted for 37.5% of the first half of the year.

Hua Changchun, chief economist at Guotai Junan, believes that the growth rate of infrastructure investment in July is stable and rising, with reserve projects continuing to be launched. Since the base last year was relatively low, the growth rate of infrastructure investment in the second half of the year is expected to maintain a stable upward trend.

Wang Huajun, an analyst at Guojin Securities, believes that the "special bond" policy supports infrastructure, and the policy has a strong counter-cyclical intention. The rebound in infrastructure investment is highly likely. Coupled with the demand for updates driven by environmental protection factors, it is predicted that the sales growth rate of excavators in 2019 is expected to remain at a double-digit level. Reported by Zhang Zhongyin.