China’s Industrial Profit Growth Slows on Virus and Flood Impact
(Bloomberg) -- Profit growth at China’s industrial firms eased again in July as floods and virus outbreaks in some parts of the country curbed output, while raw material prices rose.
Industrial profits growth decelerated to 16.4% in July from a year earlier, the National Bureau of Statistics said Friday, compared with a 20% increase in the previous month. For the first seven months of the year, profits climbed 57.3% from a year earlier.
“The improvement in industrial profits remained unbalanced with lingering uncertainties,” Zhu Hong, an economist with the bureau said in a statement accompanying the data release.
Sporadic coronavirus cases and floods have put pressure on the recovery of industrial profits, she said, adding that elevated commodity prices continued to squeeze the profit margins of companies, especially small businesses in mid- and down-stream sectors.
A higher year-earlier base relative to June also contributed to the slowdown.
China’s output in the industrial sector grew less than expected in July as Beijing tightened regulations to curb pollution and property market risks. Disruptions from floods in the central province of Henan, and a continued shortage of computer chips which caused a fourth consecutive month of falling car production also weighed on production.
Over 60% of industrial firms in Zhengzhou, the capital city of Henan, suspended operation in July due to the heavy flooding, for five days on average, according to a survey done by its statistics bureau.
Factory-gate inflation surged again to 9% in July, after a slight retreat in the previous month.
Profit growth at mining and raw material manufacturing quickened in July, on higher demand and faster sales, Zhu said, while pharmaceutical manufacturing also grew rapidly, thanks to robust demand for vaccines and personal protective gears.
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