China’s industrial profits keep plunging as prices decline further in first quarter

Profits at industrial firms in China continued to plunge in the first three months of the year, as a pickup in factory production failed to offset a further decline in prices.

Industrial profits in the January-March period declined 21.4 percent from a year earlier, the National Bureau of Statistics said on Thursday. The drop narrowed only slightly from a fall of 22.9 percent in the first two months of 2023.

Profits for the single month of March fell 19.2 percent from a year ago, according to official figures.

“The decline in industrial companies’ profits is still relatively big, and companies’ losses are still high,” NBS statistician Sun Xiao said in a statement accompanying the data. “We should continue focusing on expanding market demand, lift market confidence, improve companies’ expectations, better coordinate supply and sales, and push for industrial companies’ profits to rebound faster.”

There were some positive signs: Car industry profits grew 9.1 percent in March from a year earlier, driven by recovering car demand and rebounding sales, according to Sun. That reversed a 41.7 percent plunge in the January-February period.

Several consumer product manufacturing sectors also saw improvement, with the alcohol, beverage and refined tea industry recording a 39.9 percent jump in profits last month, according to the NBS statement.

While factory activity has been improving, it’s been tough for companies to pull themselves out of last year’s deep, COVID-19 induced slump. Exports rebounded last month, largely due to resilient demand from Southeast Asia and other markets, yet the pickup in industrial output fell short of expectations.

Producer deflation has also persisted, a sign that factories are unable to boost prices, which is weighing on their profits.