China's industrial profits down in June, adding to fears of slowing

BEIJING (Reuters) – Profits from Chinese industrial firms contracted in June after a brief rise the previous month, raising fears that the slowdown in the manufacturing sector resulting from a deadly trade war is weighing on economic growth.

China's industrial profits have declined since the second half of 2018, due to the slowing economy and the intensification of the US-China trade conflict. Many industrial companies have postponed their decisions and cut back on investment in the manufacturing sector.

Economic growth in the second quarter slowed to a 30-year low.

Industrial profits fell 3.1 percent in June from the previous year to 601.9 billion yuan (87.5 billion US dollars), according to data released on Saturday. the National Bureau of Statistics (NBS), after gaining 1.1% in May.

In the first six months, industrial enterprises posted profits of 2.98 billion yuan, down 2.4% from the previous year, compared with a 2.3% decline in January. may.

The decline in profits in the first half is attributable to lower profits in the auto, oil and steel processing industries, said Zhu Hong, of the statistics bureau, in an accompanying statement. the data.

Producer price inflation, an indicator of industrial profitability, was reduced to zero in June compared to the previous year, reviving concerns about deflation, which could prompt the authorities to take more aggressive stimulus.

US and Chinese negotiators will meet for the first time since their presidents, Donald Trump and Xi Jinping, agreed in late June to restart talks to end the one-year trade war.

Governments of the world's largest economies have levied billions of dollars in tariffs on their respective imports, disrupting global supply chains and disrupting financial markets in China's trade dispute with the rest of the world .

The month of June marked the first full month of US tariff increases on the $ 200 billion worth of Chinese goods, which the United States imposed after the break-up of trade negotiations. Exports and imports fell.

DIVERGENT FORTUNES

Saturday's data showed that profits from the building materials and machinery industries helped mitigate the decline in overall profits in the first half of the year, likely due to higher public spending on infrastructure, which supported some companies such as railway equipment manufacturers, miners and metal producers.

Sany Heavy Industry Co Ltd. announced this month that it expects first-half earnings growth of 91.8% -106.6% over the previous year.

However, the profits of manufacturers of telecommunications equipment and electronic equipment, which are more vulnerable to US tariffs than other product clbades, decreased by 7.9% in January-June.

The most traded iron ore contract on the Dalian Commodity Exchange rose 16.4% in June, weighing on steel sector profits.

According to the Bureau of Statistics, profits of Chinese industrial enterprises decreased by 8.7% on an annual basis for the first six months of the year.

Liabilities for industrial enterprises increased by 5.6% at the end of June, compared to 5.3% at the end of May.

Private sector profits rose 6.0% in January-June, down from 6.6% in the first five months.