China: Industrial profit growth rises in January-February – Nomura

China’s year-on-year industrial profit growth rebounded by 5.3 percentage points (pp) to 16.1% in January-February from December, but was much lower than January-February growth and full-year growth in 2017.

Key Quotes

“The acceleration in industrial profit growth was mainly due to resilient industrial production and sales, which more than offset the moderation in PPI inflation. Moreover, operating costs of industrial enterprises continued to trend down.”

“Despite some improvement early in the year, we remain cautious on the near-term industrial profit growth outlook. The benefit from high prices should subside as PPI inflation continues to moderate, while the cooling property sector and rising trade protectionism should weigh on aggregate demand, and hence investment and output growth. We expect industrial profit growth to lose steam in the months ahead.”