China’s industrial profits growth slows for 5th month as orders wane

Slowing corporate profits will put pressure on jobs, ultimately tapping the brakes on household consumption .

The slowdown was in line with data last week that showed September’s factory output grew at the weakest pace since February 2016.

Slowing corporate profits will put pressure on jobs, ultimately tapping the brakes on household consumption and hurting China’s overall growth.

Industrial profits rose 4.1% in September from a year earlier to 545.5 billion yuan ($78.57 billion), the National Statistics Bureau (NBS) said on Saturday. That was less than half of the pace in August, and the slowest since March.

Earnings in September were mainly pressured by a greater slowdown in production and sales, declining price growth, as well as a high statistical base a year earlier, He Ping of the statistics bureau said in a statement accompanying the data.

An escalating trade war with the United States has also added to the pressure on overall output, and threatens to chill business investments and earnings growth in the months ahead.

Data last week showed the Chinese economy in the third quarter grew at the weakest pace since the global financial crisis as manufacturing output slowed.

The manufacturing sector has also been squeezed by a reduction in sources of credit amid Beijing’s multiyear crackdown on corporate debt and risky lending practices.

While authorities are taking steps to ease pressure on firms with liquidity issues, many companies still face difficulty in obtaining funding. Interest rates on loans have also risen due to the reduced supply of credit.

A cooling property market—an engine of economic growth—has also sapped demand for constructionrelated goods and services, curbing industrial profits.

Softer infrastructure in- vestment despite Beijing approving more projects in the second half this year has also added pressure on the bottom-lines of industrial firms. In the first nine months of the year, industrial profits increased 14.7%, driven by earnings of companies producing steel, building materials, oil and petrochemicals.

But the growth slowed from the 16.2% pace seen in January-August.

Earlier this month, Jiangsu Shagang Co Ltd, the listed arm of China’s biggest privately owned steel mill Shagang Group, reported a 91.5% increase in net profit for the third quarter.

The average profit margin for steel remains very high, according to analyst at Argonaut Securities in Hong Kong.