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China's industrial profits up 1.1% in May as sales quicken

Economic IndicatorsJun 27, 2019 03:36
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BEIJING (Reuters) - Bolstered by improving sales, profits for China's industrial companies rose in May after shrinking the previous month, bucking a months-long downtrend, official data showed on Thursday.

Industrial profits rose 1.1% in May from a year earlier to 565.6 billion yuan (64.78 billion pounds), according to data released by the National Bureau of Statistics (NBS), following a 3.7% fall in April.

In the first five months, industrial firms earned profits of 2.38 trillion yuan, down 2.3% from a year earlier, compared with a 3.4% drop in January-April.

The uptick in May was driven by quicker sales and slower increases in corporate costs, Zhu Hong of the statistics bureau said in a statement accompanying the data, adding that better margins in equipment manufacturing and the coal sector attributed to the bulk of the increase.

Moreover, profits in high-tech manufacturing and emerging industries both turned positive after declining the month before.

China's industrial profits have been faltering since the second half of 2018 as the economy slowed and producer prices weakened. The escalating U.S.-China trade war and cooling global demand have added to the pressure, with both sides announcing in May they were hiking tariffs on each others' goods and Washington threatening even more.

Producer price inflation, one gauge of industrial profitability, slowed to 0.6% in May, while industrial output growth unexpectedly cooled to a 17-year low of 5%.

To support the economy and spur domestic demand, policymakers have stepped up approvals for big infrastructure projects, freed up more funds for lending and cut taxes. The People's Bank of China (PBOC) has slashed banks' reserve requirement ratios six times since early 2018, with further cuts expected in coming months.

The biggest share of profits was still dominated by upstream sectors in January-May, seeing faster growth.

China's crude steel output hit a record high in May, even as a jump in prices of raw materials, particularly iron ore, cut into mills' profit margins.

Steel demand from downstream sectors in China has turned "very strong", Singapore-based data analytics company Tivlon Technologies said this week.

But a continued crackdown on air pollution has weighed on smokestack industries. The country's top steelmaking city of Tangshan last week summoned 48 companies and ordered them to trim output to reduce smog.

Profits at China's state-owned industrial firms were down 9.7% on an annual basis for the first five months, according to the statistics bureau.

Liabilities of industrial firms rose 5.3% year-on-year as of end-May versus a 5.5% increase by end-April.

China's industrial profits up 1.1% in May as sales quicken
 

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