China Industrial Profits Growth Slows to 11.2% in July, Weakest in Seven Months
Key Points
- China's industrial profits grew 11.2% in July year-over-year, the slowest pace since January 2024, according to National Bureau of Statistics data released Thursday.
- For the first seven months of 2024, industrial profits climbed 17.6% year-over-year, down from 18.7% growth in the first half-year, losing momentum as demand softens.
- Integrated circuit manufacturers contributed over 80% of profit gains in the electronics sector with 18.5% growth January-July, while furniture manufacturing profits plummeted 58.2% for the same period.
The deceleration masks sharply divergent performance across sectors. Integrated circuit manufacturers, led by computing and storage chip producers, saw profits expand 18.5% in the January-July period, contributing over 80% of profit gains across the electronics sector and benefiting from global artificial intelligence demand. Raw materials manufacturers posted 55.2% profit growth year-over-year through July, while furniture manufacturing profits fell 58.2% for the same period, worsening from a 52.7% decline recorded as of June.
Factory-gate inflation slowed to 3.5% in July, a three-month low, as the reflation boost that peaked in June began petering out. Real exports growth collapsed to 5.5% in July from 11.6% in June, while a Bank of America activity tracker indicated "broad-based loss of growth momentum" in the economy during the month, with retail sales, port throughput and electricity production all declining.
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Economists expect Chinese authorities to deploy existing fiscal resources more rapidly to stabilize corporate profitability as consolidation accelerates in struggling sectors. "This should provide some near-term stabilisation and put a floor under growth," said Sophie Altermatt, economist at Julius Baer, though she cautioned that "a strong cyclical rebound remains unlikely as the property market slump, sluggish household confidence and subdued private investment constrain the recovery."
The divergence between AI-driven manufacturing gains and consumer-facing industries reflects the uneven nature of China's recovery. While semiconductor and advanced manufacturing segments remain resilient on global demand, the weakness in furniture production and infrastructure-dependent sectors signals that domestic demand remains under pressure, limiting the breadth of the industrial rebound despite headline profit growth still in double digits.
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Market Outlook
Economists anticipate Chinese authorities will accelerate deployment of existing fiscal resources in coming months to shore up corporate profitability, with potential additional easing steps if growth continues deteriorating. However, analysts expect near-term stabilization rather than strong recovery, given constraints from the property sector slump and weak household confidence limiting sustained profit expansion beyond AI-driven manufacturing segments.
Sources: CNBC and other international news outlets.
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