Profits of Chinese industrial companies rose 3.7% in May from a year earlier, slowing from April’s pace and adding to concerns that the world’s second-largest economy may be losing some momentum.
A return to profit growth in the first quarter and a strong jump in March in particular had fuelled hopes that China’s economy was perking up, but data since then has suggested it may be stabilising at best.
“The continued slowdown in May profit growth further supports our view that growth momentum has remained weak or possibly weakened further,” economists at Nomura said in a note.
“We maintain our forecast for a slowing of real GDP growth to 6.3% year-on-year in Q2 from 6.7% in Q1.” Profits in May rose to 537.2bn yuan ($81.21bn), the statistics bureau said yesterday.
In the first five months of this year, profits rose 6.4% compared with the same period last year, the National Bureau of Statistics said on its website.
But the performance was uneven across sectors, with profits in the mining sector falling 93.8% from a year earlier, the bureau said.
Industrial profits in January-April rose 6.5% from a year earlier, with April up 4.2%.
“Growth in industrial profits slowed down slightly in May compared with the previous month, but positive changes have emerged from the industrial sectors,” NBS official He Ping said in a statement accompanying the data.
He added that profits of energy and raw material sectors including coal, steel and non-ferrous industries saw a resumption of growth in May.
In May, profits of the coal mining sector grew 2.5 times from a year earlier, snapping a falling streak over the past few years, the bureau said.
The pick-up in profits in these sectors might be an indication that Beijing’s efforts to remove excessive capacity, particularly in the coal and steel sectors, may be starting to have an effect.
The central government will earmark 27.64bn yuan to help local governments pay for capacity closures in these two sectors this year.
China’s top economic planner said on Sunday that it planned to cut steel capacity by 45mn tonnes and lower coal output capacity by 280mn tonnes.
Chinese industrial firms’ debt at the end of May was 4.9% higher than at the same point last year.
The data covers large enterprises with annual revenue of more than 20mn yuan from their main operations. Profits at China’s state-owned firms fell 9.6% in the first five months of 2016 from a year earlier, wider than the a 8.4% fall in the first four months, the Ministry of Finance said last week. Producer prices fell at their slowest rate in May since November 2014, supported by a government investment spree and higher commodity prices.
On a monthly basis, producer prices rose 0.5%, the third increase in a row.