October industrial profits drop 2.1%
Print Edition
CHINA’S industrial profits dropped 2.1 percent from a year earlier in October, the worst in more than two years, and reversing the increase of 0.4 percent in September, official data showed yesterday.
The profits totaled 575.5 billion yuan (US$93.7 billion) last month, landing net earnings of industrial companies in the first 10 months at 4.94 trillion yuan, up 6.7 percent year on year, according to the National Bureau of Statistics.
He Ping, a bureau researcher, said the sluggish market demand, rising production costs and dropping prices at end-users were the main reasons for the profit contraction.
“Although raw materials were cheaper, labor costs rose and countered that reduction,” He said. “The factory-gate prices dropped too, eroding deeply the profit-making ability of manufacturers.”
The Producer Price Index, the factory-gate gauge of inflation, fell 2.2 percent in October, widening from the decline of 1.8 percent a month earlier and extending the negative trend to 32 consecutive months.
Earlier data suggested that China’s manufacturing sector may grow at the slowest pace in six months in November, a sharp turn from the expansion one month ago.
The HSBC Flash China Manufacturing Purchasing Managers’ Index dropped to 50 in November from the final reading of 50.4 in October, indicating continued weakness in the manufacturing sector and the overall economy.
Last Friday, the People’s Bank of China lowered the benchmark interest rate for one-year deposits by 25 basis points and slashed the one-year lending rate by 40 basis points — the first such move since July 2012.
Wendy Chen, an analyst with Nomura, said the interest rate cut will reduce slowdown concerns while calming the associated risks of capital flight.
“We are now more confident with our forecast of 7.3 percent GDP growth in the fourth quarter,” Chen said.
China’s economy grew at the slowest pace in more than five years in the third quarter, registering at 7.3 percent and led by corrections in the property sector.
In the first 10 months, the profits of foreign-funded enterprises and those from Hong Kong, Macau and Taiwan rose the most by 12.6 percent to 1.2 trillion yuan.
State-owned enterprises also managed 1.21 trillion yuan in profits, but was down 1.2 percent from a year earlier.
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