May 16, 2022

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China's industrial profits rise, but stall in single-digit growth By Reuters

China’s industrial profits rise, but stall in single-digit growth By Reuters

© Reuters. file image. An image of a fully operational coal plant in Wuhan, China. Photograph: Reuters

BEIJING (Reuters) – Earnings growth at Chinese industrial firms accelerated in the January-February period, in line with other indications of momentum in the economy, although the outlook overshadowed by the COVID-19 outbreak and the war in Ukraine is fueling calls. for monetary support measures.

On Sunday, the Office for National Statistics said earnings rose 5.0% from a year earlier, compared to a 4.2% increase in December.

Growth in January-February was driven by higher profits in the energy and commodities sectors, thanks to higher prices for resources such as and.

January and February data are generally collected to smooth out distortions from the Lunar New Year holiday, which can fall in any month.

Monthly profit growth in distribution among other industrial companies was affected by higher raw material costs, which have fallen in double digits since November.

Slightly faster growth in industrial profits coincided with improved NBS data on industrial production, retail sales and fixed-asset investment in January-February, indicating that the impact of recent policy measures is starting to take hold.

However, this year’s challenges have emerged, including the most severe COVID outbreak in China since the start of the epidemic in 2020, fueled by the omicron variable, which threatens to disrupt local economies and reduce consumer spending.

“The gap between production and marketing profit margins has widened as distribution margins have fallen further,” Goldman Sachs (NYSE) analysts wrote in a note.

“We expect the COVID outbreak in several provinces to affect industrial profits in the short term,” he said.

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They said that given the coronavirus outbreak, steps can be expected to further ease monetary and fiscal measures.

The financial hub of Shanghai has been battling the worst wave of COVID in the past month since the disease first broke out in China two years ago.

(dollar = 6.3658 Chinese yuan)

(Reporting by Ryan Wu, Elaine Zhang and Huiling Zhou. Editing in Spanish by Marion Giraldo)

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