China’s industrial profits extend slump into seventh month

BEIJING (Reuters) -Profits at China’s industrial firms fell 6.7% in July from a year earlier, extending this year’s slump to a seventh month with weak demand squeezing companies as a post-pandemic recovery faltered in the world’s second-biggest economy.

Earnings shrank 15.5% year-on-year for the first seven months, following a 16.8% decline in the first half of the year, data from the National Bureau of Statistics showed on Sunday.

Profits were down 8.3% in June, according to the bureau, which only occasionally publishes monthly figures.

“Commodity prices are running low, the pressure on raw material costs in the midstream and downstream industries has eased. Unit cost of industrial enterprises has improved overall,” NBS statistician Sun Xiao said in an accompanying statement, adding that unit costs in July posted the first year-on-year decrease since the beginning of this year.

Big Chinese manufacturers posted losses for the first half, with engineering firm China Aluminum International reporting a net loss of 830.6 million yuan ($114.2 million), compared with a year-earlier net profit of 123.6 million yuan.

Major banks have downgraded their growth forecasts for the year to below the government’s target of about 5% as recovery sputters on a worsening property slump, weak consumer spending and tumbling credit growth, prompting the authorities to slash interest and promise further support.

State-owned enterprises saw earnings tumble 20.3% in the first seven months of this year, foreign firms posted a 12.4% decline and private-sector companies recorded a 10.7% fall, a breakdown of the data showed.

Profits dived for 28 of 41 major industrial sectors during the period, with the ferrous metal smelting and rolling processing industry reporting the deepest slump at 90.5%.

The central bank said this month it would keep its policy “precise and forceful” to support recovery. It remains to be seen if more significant measures would come to shore up growth.

President Xi Jinping on Tuesday told a forum in South Africa that the economy was resilient and the fundamentals for long-term growth remained unchanged.

Industrial profit numbers cover firms with annual revenues of at least 20 million yuan ($2.77 million) from their main operations.

($1 = 7.2761 Chinese yuan)

(Reporting by Reporting by Ethan Wang, Judy Hua and Joe Cash; Editing by William Mallard)

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