Slowing Economy and Deflation Cause China’s Company Profits to Drop
Chinese industrial companies’ profits fell in August, with the 2% drop from a year ago another sign of how the slowing economy is hurting business and increasing problems for the government.
The fall was due to a slowdown in industrial production and sales, the deeper drop in producer prices and super typhoons hitting the nation, according to a statement from the National Bureau of Statistics Friday. For the first eight months, profits contracted 1.7%. Margins of state-owned enterprises dropped by 8.6% in the period, while private companies saw an increase of 6.5%, according to the NBS.
The weakness of the economy in August looks set to continue into September, according to a set of early indicators compiled by Bloomberg. Even with trade tensions with the U.S. easing somewhat since August, manufacturing this month is forecast to have contracted again, which will put more pressure on the government to act to counter already slowing growth.
See sectoral breakdown of profits here
“The decline in China’s industrial profits in August reinforces our concern that the economy continues to decelerate,” Bloomberg Economist David Qu wrote in a note. “We reiterate our view that further supportive, but measured, policies are necessary to stabilize growth. We expect the central bank and the government to step up stimulus accordingly.”
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