Between January and October, the overall profits of China’s industrial companies fell further as outbreaks of COVID-19 flared up and cities introduced new measures to combat the spread of the virus, including targeted lockdowns, which reduced economic activity.
Industrial profits fell 3.0% in the first 10 months of 2022 compared to a year earlier. That compares with a 2.3% fall in January-September, Office for National Statistics data released on Sunday showed.
The bureau has not reported separate monthly figures since July.
Profits fell in 22 of China’s 41 major industrial sectors.
“Recent outbreaks of domestic epidemics have occurred frequently, the risk of a global economic recession has increased, and industrial enterprises are facing greater pressure,” the bureau said in a statement.
Dismal data from the world’s second-largest economy also reflects a debt repayment crisis in the country’s real estate sector and a sharp slowdown in consumer spending.
Outbreaks have only grown since October, and growing anger over China’s tough no-covid policy aimed at eradicating the virus sparked rare citizen protests over the weekend. China on Sunday reported a record number of infections for the fourth day in a row.
Producer profits fell 13.4% in the first ten months, slightly below the 13.2% drop in January-September.
“Industrial profits remained under pressure as prices were squeezed by overall weak domestic demand and production costs remained high in some manufacturing sectors,” China Everbright Bank analyst Zhou Maohua said.
The sectors showing the biggest declines included the oil, coal and fuels industry, which saw profits fall by 70.9%. That compares with a 67.7% drop in the first nine months.
In some sectors that had seen strong profit growth, growth rates have slowed significantly.
In the mining industry, profits rose by 60.4% in January-October, compared with growth of 76.0% in the first nine months.
Some analysts now believe China’s GDP may shrink in the current quarter from the third quarter and have cut their forecasts for 2023, predicting a slow and bumpy road to economic recovery.
Analysts at Nomura expect fourth-quarter GDP to fall 0.3% from the previous three months, and cut their fourth-quarter annual growth forecast to 2.4% from 2.8%.
Likewise, analysts at Oxford Economics have cut their GDP forecasts for 2022 and 2023 as they believe lockdown measures are expected to be extended.
To support the faltering economy, the authorities recently launched a series of measures, including measures to soften some of the COVID curbs and financial support for the real estate market, which helped the market sentiment.
China said on Friday it would cut the amount of cash banks must hold as reserves for the second time this year, freeing up about 500 billion yuan ($69.8 billion) of long-term liquidity.
Industrial production in China rose 5.0% last month from a year earlier, missing the 5.2% rise expected in a Reuters poll and slowing from 6.3% in September.
The industry earnings data covers large firms with annual core business revenue of more than 20 million yuan.
