China's industrial profits suffer first drop in three years

BEIJING • Earnings at China's industrial firms last month dropped for the first time in nearly three years, as slackening external and domestic demand left businesses facing more strain next year.

The gloomy data points to a further loss of economic momentum as a trade dispute with the United States piles pressure on China's vast manufacturing sector and as firms shelve their investment plans, executives say.

Industrial profits fell 1.8 per cent last month from a year earlier to 594.8 billion yuan (S$120 billion), the National Bureau of Statistics said on its website yesterday - the first decline since December 2015.

The fall in profits largely reflected slowing growth in sales and producer prices as well as rising costs, a statistics bureau official said in a statement.

Economists expect earnings to continue to worsen next year, weighed down by smaller gains in industrial prices due to cooling demand, with some even warning of the risk of deflation.

"Soft economic indicators such as producer prices, industrial output and orders all point to further pressure on corporate profitability," said Shanghai-based analyst Nie Wen.

China's economy expanded at the slowest pace last quarter since the global financial crisis, hit by a years-long deleveraging campaign, a cooling property market and a trade dispute with the US, and is expected to cool further next year.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 28, 2018, with the headline 'China's industrial profits suffer first drop in three years'. Print Edition | Subscribe