| Actual | Previous | |
|---|---|---|
| Year to Date on Y/Y Basis | -18.8% | -20.6% |
Highlights
Chinese industrial profits remained depressed in the latest official data for May, down 18.8 percent year-over-year in the first five months of the year as the world's second-largest economy continues to struggle after Beijing's no-Covid policy restricted economic activity last year. The pace of decrease decelerated from 20.6 percent year-to-date in April 21.4 percent in March. In the month of May, industrial profits fell 12.6 percent on the year after sliding 18.2 percent in April.
The data came before Friday's release, in which the China Federation of Logistics and Purchasing (CFLP) manufacturing PMI is expected to improve only slightly in June to 49.1 after contracting further in May to 48.8, while the non-manufacturing PMI is expected to slip to 53.7 from 54.5.
The data came before Friday's release, in which the China Federation of Logistics and Purchasing (CFLP) manufacturing PMI is expected to improve only slightly in June to 49.1 after contracting further in May to 48.8, while the non-manufacturing PMI is expected to slip to 53.7 from 54.5.
Definition
Industrial profits are calculated as total revenue of enterprises gained from principal business operations minus the total costs incurred. The survey covers enterprises above a designated size, namely those with revenue from principal activities of more than CNY20 million. As well as aggregate data, more detailed data are reported for various industries and according to the nature of the enterprise’s ownership.
Description
Profits are the income of an enterprise and a key factor that determines the extent to which it can undertake investment spending. When profits are strong, enterprises will be able to increase their capital spending. This could allow better growth prospects for an enterprise and is likely to increase its underlying value. When profits decline or grow at a slower pace, then capital spending tends to decline or weaken.
Profits also reveal the health of an enterprise. When an enterprise’s profits are anemic during economic expansion, it suggests that the enterprise is not performing efficiently. When a enterprise’s profits are relatively strong, even during an economic downturn, it usually means that the enterprise is well-managed. For publicly listed companies this will have a large impact on the company’s stock price. In China, many major enterprises are owned by the government, and the strength of profits provide an important measure of their performance and the extent to which they are supporting or weakening government finances. Looking at the detailed data for industrial profits can also reveal information about the relative performance on different industries.
Profits also reveal the health of an enterprise. When an enterprise’s profits are anemic during economic expansion, it suggests that the enterprise is not performing efficiently. When a enterprise’s profits are relatively strong, even during an economic downturn, it usually means that the enterprise is well-managed. For publicly listed companies this will have a large impact on the company’s stock price. In China, many major enterprises are owned by the government, and the strength of profits provide an important measure of their performance and the extent to which they are supporting or weakening government finances. Looking at the detailed data for industrial profits can also reveal information about the relative performance on different industries.
