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China’s industrial profits drop further as COVID woes take toll on economy

  • January-October Industrial Profit Down 3.0% YoY vs. -2.3% Jan-September
  • Risks from domestic COVID outbreak and global recession warned

BEIJING (Reuters) – A resurgence of the novel coronavirus disease (COVID-19) epidemic, with cities imposing new measures to contain the virus, including targeted lockdowns, and slowing economic activity, pushed China’s economy to a halt. Industrial firms saw further declines in overall profits from January to October.

In the first 10 months of 2022, industrial profits fell by 3.0% year-on-year. That compares with a 2.3% decline from January to September, according to National Statistics Office data released on Sunday.

The agency has not reported a single monthly figure since July.

Profits fell in 22 of China’s 41 major industrial sectors.

“With recent epidemics occurring frequently in the country and the risk of a global recession increasing, industrial enterprises are facing greater pressure,” the bureau said in a statement.

The pessimistic data for Singapore, the world’s second largest economy, also reflected a debt service crisis within the country’s property sector and a sharp slowdown in consumer spending.

Outbreaks have been on the rise since October, and outrage over China’s tough zero-COVID policy aimed at eradicating the virus has been rare. public protest over the weekend.China reported a fourth straight day of infections on Sunday record the case.

Manufacturer profits fell 13.4% in the first 10 months, slightly lower than the 13.2% decline from January to September.

Zhou Maohua, an analyst at China Everbright Bank, said, “Companies’ profits continue to be weighed down as the overall slump in domestic demand weighs on prices and input costs remain high in some manufacturing sectors. ‘ said.

The sectors with the steepest declines included the oil, coal and fuel processing industries, where profits fell by 70.9%. This compares to his 67.7% drop in the first nine months.

In some sectors that had strong earnings growth, the pace of growth slowed significantly.

Mining sector profits increased by 76.0% in the first nine months, while they increased by 60.4% from January to October.

Some analysts now believe China’s GDP could contract from the third quarter, lowering their forecasts for 2023 and predicting a slow and bumpy road to reopening the economy.

Analysts at Nomura expect fourth-quarter GDP to contract by 0.3% from the previous three months, lowering their fourth-quarter growth forecast to 2.4% from 2.8% year-on-year.

Similarly, analysts at Oxford Economics have lowered their 2022 and 2023 GDP forecasts as they believe more lockdown measures are expected.

To support the sluggish economy, officials recently Simple Some COVID restraints and offerings financial support to the real estate market that has supported market sentiment.

On Friday, China said it would cut twice this year the amount of cash banks must hold in reserves, freeing up about 500 billion yuan ($69.8 billion) of long-term liquidity.

China’s industrial output surged 5.0% year-on-year last month, below the 5.2% rise expected in a Reuters poll and slowing from the 6.3% growth seen in September.

Industrial profit data are for large enterprises with annual sales of more than 20 million yuan from their main business.

($1 = 7.1642 Chinese Yuan)

Reporting by Liz Li, Liangping Gao and Ella Kao. Additional reporting by Wang Shuyan. Edited by Kim Coghill and Edwina Gibbs

Our criteria: Thomson Reuters Trust Principles.

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