China’s industrial profits fell 5.5% in October, the worst level in five months

Chinese industrial companies took a hit to their earnings in October as trade tensions with the US escalated that month while broader growth in the economy slowed.

Industrial profit 5.5% down from a year ago In October, the biggest drop since June National Bureau of Statistics data showsReversing the double-digit growth seen in August and September.

For the first ten months of the year, profits of major industrial firms rose 1.9% from a year earlier, official data showed. 3.2% increase In the period from January to September.

China and the US Amid trade tensions that month escalated over export restrictions, US President Donald Trump threatened additional 100% tariffs on imports from China before the two economic superpowers. A deal was made in South Korea at the end of the month.

Profits in the mining sector fell 27.8% in the January to October period, while profits in the manufacturing and utilities sectors, which include electricity, heat, fuel and water suppliers, rose 7.7% and 9.5% respectively.

Carmakers’ profits rose 4.4% in the first ten months of the year, compared with 3.4% climb In the first nine months.

Profits at state-owned enterprises were flat, compared with 3.5% for foreign-invested industrial firms and 1.9% for private firms, including investments from Hong Kong, Macau and Taiwan.

NBS chief statistician Yu Weining attributed the decline to October High-base effects From last year and rapid expansion in corporate spending.

China’s manufacturing activity More agreement than expected In October, the official manufacturing purchasing managers’ index fell to a six-month low of 49.0. A reading above the 50 benchmark indicates growth, while a reading below it indicates contraction.

China consumer prices An unexpected return to growth in OctoberAfter being in negative territory for most of the year, it is up 0.2% from a year ago. Core inflation, stripping out food and energy prices, rose 1.2% Highest since February 2024.

The reality, however, was less rosy than the core inflation reading, according to Ting Lu, chief China economist at Nomura Bank, who estimated that about a quarter of the 1.2% core inflation reading had “nothing to do with domestic consumption” but was mainly due to rising gold prices.

“The underestimated decline in rents also contributed to the overstatement of headline inflation data,” Lu said, adding that the country is stuck in a “moderate recession” from the end of 2022.

“It will take longer for China to get out of the deflationary conundrum it is currently facing, especially as economic growth slows down from mid-2025,” Lu added.

The economy has slowed significantly, Only 4.8% expansion in the third quarter, and recent indicators suggest that it may have lost more momentum early in the fourth quarter.

Retail sales rose 2.9% in October, Slowed for fifth consecutive month and showing the weakest growth in a year. Fixed-asset investment fell 1.7% for the first ten months of the year, the most since 2020 during the pandemic. Industrial production also expanded by a lower-than-expected 4.9%.

Meanwhile, the urban unemployment rate remained unchanged Elevated to 5.1% in October.

Chinese policymakers have signaled a shift toward increasing consumption over the next five years, but have yet to release new meaningful stimulus. Economists widely expect Beijing to hold off on massive stimulus as the economy is on track to meet its growth target. “About 5%” this year..

“Policymakers don’t want to miss or overachieve targets,” said Larry Hu, chief China economist at Macquarie Group, which expects China’s economy to grow 5% in 2026 on strong export growth.

That said, “deflationary pressure” will likely continue to weigh on the economy as strong external demand reduces the urgency of domestic stimulus, Hu added.