Industrial profit plunges as China hit by another covid outbreak

In the first ten months of the year, industrial firms in China saw their profits continue to fall as a result of Covid restrictions and declining factory-gate prices.

The National Bureau of Statistics released data on Sunday showing a 3.0% decline in industrial profits from January to October compared to the same period last year. In contrast, the first nine months of the year saw a decline of 2.3%.

Since June, the NBS has not made single-month data available.

“The structure is in general improved while the profit is dropping,” said in an interpretation statement with the data. “The Covid outbreaks in China and the recession risks of the global economy may add more pressure to the recovery of industrial profits.”

Covid restrictions were increased in October as outbreaks started to spread throughout areas, including the manufacturing heartland of Guangdong province, slowing consumer and corporate activity. Additionally, the rate of decline in global demand caused an unanticipated decline in exports last month.

As deflation sets in, businesses are finding it difficult to raise prices, which is placing pressure on profit margins. For the first time in over two years, producer prices declined in October, mostly as a result of declining global commodity prices and weaker local demand as Covid limitations spread.

Destocking by industrial enterprises has slowed down, according to Bruce Pang, chief economist and head of research for Greater China at Jones Lang LaSalle, who stated in a statement delivered via Wechat on Sunday. This may be related to the stability of the industrial supply-chain. At the end of October, the average payback duration for accounts receivable was 54.6 days, up 0.6 days from the end of September, and product turnover days were 18.2, respectively.

While authorities have taken a number of steps to make Covid controls more focused and less detrimental to the economy, a record-breaking increase in cases over the past week has forced major cities like Beijing and Guangzhou to tighten mobility restrictions. Some economists have revised their growth projections downward due to the possibility of a challenging and gradual reopening of the nation.