China’s Industrial Profits Decline as Economy Weakens

(Bloomberg) -- Profits at China’s industrial companies decreased, highlighting the headwinds faced by the world’s second-largest economy.

• Industrial firms’ profits fell 3.1% in June from a year earlier, the National Bureau of Statistics said in a statement on Saturday. Changes to how the data has been collected have made economists question the accuracy of the release.

Key Insights

• China’s economic growth slowed to its weakest pace since 1992 in the second quarter, underlining the importance of trade talks due to resume in Shanghai next week. This will be the first in-person talks since the G-20 summit last in June.
• Factories are under stress from slowing global demand, and the hurdle of higher tariffs as well as the pressure on profitability from the resurgence of deflationary risks in producer prices.
• China’s official manufacturing purchasing managers’ index, a gauge of activity in the sector, stayed at 49.4 in June, missing the 49.5 forecast in a Bloomberg survey of economists. Separately, the Caixin manufacturing PMI, which better reflects the private sector, fell to 49.4 from 50.2 in May. A reading below 50 signals contraction.

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