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Profits of Chinese industrial companies decline 9.9% YoY in October
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The biggest drop since at least 2011
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Declining producers’ prices are seen as the reason, drop in PPI expected to continue in November
Moods on the markets remain upbeat as China and the United States are said to be closing in on the “Phase One” trade agreement. However, one should keep in mind that while both sides continue to raise expectations, no real improvement took place yet. The latest data on profits of the Chinese industrial companies confirms it. Profits dropped 9.9% YoY in October, the biggest drop on record ( since at least 2011). This drop can be ascribed to declining producers’ price in China. Unfortunately, a rebound may not come soon. Chinese manufacturing PMI sits in a contraction territory and data for October showed the 17th straight month of deteriorating outlook for new export orders. Situation may even get worse as another round of US tariffs may come into force on December 15. A point to note is that the Chinese authorities have launched a number of stimulating measures in order to tackle faltering growth and as one can see, those failed to show a major effect. Producers’ prices are expected to continue falling in November and industrial profits could fall even lower as well. Tariff rollback could boost demand but it should be taken for granted given that China and the US have walked away from the negotiating table a few times already.
Profits of Chinese industrial companies follow declining producers’ prices. As decline in Chinese PPI is expected to continue, woes of Chinese companies may continue as well. Source: Bloomberg
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