China’s Industrial Profits Drop Persists as Economy Weakens

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The decline in China’s industrial profits eased in July, though the slowing economic recovery and deflation risks remain an overhang for the sector.

Profits last month fell 6.7% from a year earlier, according to data published by the National Bureau of Statistics on Sunday. That compared with a drop of 8.3% in June.

For the first seven months of 2023, profits declined 15.5%, easing from a 16.8% decrease a year earlier.

China’s economic recovery lost further momentum in July, with growth in consumer spending, industrial output and investment struggling across the board. Consumer and producer prices also registered the first synchronized decline since late 2020.

Industrial production was likely impacted by heavy rains and severe flooding in some parts of the country in July. Data released earlier this month showed output increasing 3.7% from a year earlier, falling short of expectations.

The central bank unexpectedly cut a key policy interest rate by the most since 2020 earlier this month, and authorities have taken steps to relax some housing policies. But so far the policy stimulus has remained measured. Banks also held a mortgage reference rate in a surprise that was seen as a move to protect profit margins.

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