Chinese industrial profits fall as weak demand weighs on economy

(Patria) - Profits at industrial firms in China continued to fall in the first four months of this year, highlighting weakening demand and deepening factory deflation in the world's second-largest economy, Bloomberg reported.

Industrial profit fell 20.6% in January-April from the same period in 2022, according to data released by the National Bureau of Statistics (NBS) on Saturday. The decline was slower than the 21.4% drop recorded in the first quarter. Profit for April was up 3.7% from a year earlier, NBS data showed. This compares to a 19.2% drop in March.

China's post-Covid recovery is faltering, recent data shows, with export growth weakening and factory gate deflation worsening in April. Industrial enterprises in China are struggling to recover from last year's Covid-induced slump, even though factory activity has picked up somewhat.

However, demand for goods remains sluggish, with the economic recovery largely driven by spending on services. Overseas purchases of Chinese products are slowing as the United States and other developed economies seek to "de-risk" from China.

Worsening producer deflation has also diminished factories' ability to raise prices, hurting profits. The producer price index in April fell 3.6% year-on-year, the biggest drop since May 2020.

Foreign firms saw profits fall 16.2% in January-April, compared with a 24.9% drop in the first quarter. Profits at private enterprises in the first four months fell 22.5%, while those at state-owned enterprises decreased by 17.9%, NBS data showed.