China Industrial Profits Growth Accelerates on Better Sales

(Bloomberg) -- China’s industrial profits rose 16.7 percent in May from a year earlier as global demand improved, helping to fill companies’ order books.

Earnings increased to 626 billion yuan ($91.5 billion), the National Bureau of Statistics said Tuesday. That compares with a 14 percent gain in April and 8.5 percent growth last year.

Economists forecast slower factory inflation in China in the second half this year, which would dent industrial profits and further erode the global reflation process that had been underway since last year. Still, China’s exports remain robust as demand in U.S. and European markets improves, helping to boost economic sentiment.

"Ongoing economic reforms may help support China’s longer-term growth prospects and accelerate China’s transition to a consumer-driven economy," according to a report written by China International Capital Corp. economists led by Liang Hong. CICC said they maintain the forecast that gross domestic product will expand at 6.8 percent this year.

Profit growth is accelerating because of improving sales and better investment returns, defying slower factory inflation, according to a statement posted on the NBS’s website.

While average input cost for larger companies in their main business is declining, costs for smaller firms are rising, which has "raised concerns," the bureau said in its statement.