China's industrial profits grew 15.1% in June year-on-year, marking a second consecutive slowdown after May's 21.1% gain, according to data from the National Bureau of Statistics. The first-half profits rose 18.7%, slightly down from the 18.8% pace in January-May, reflecting a cooling rebound from last year's weak performance.
Core Facts & Developments
- Profit Growth Slows: Industrial profits rose 15.1% in June, down from 21.1% in May, extending a two-month deceleration. First-half profits climbed 18.7%, slightly lower than the 18.8% pace in January-May.
- Energy Prices Impact: The slowdown was driven by retreating global energy prices, which had previously boosted factory-gate prices. Producer prices dipped 0.3% month-on-month in June, the first decline since July 2025.
Deeper Dive & Context
Export Strength vs. Domestic Weakness
China's exports have remained resilient, supporting industrial production, while domestic demand lags. Automobile manufacturing profits fell 19.5% in the first half, reflecting nine consecutive months of declining car sales. The property sector and consumption also show persistent weakness, contributing to the slowest second-quarter growth in over three years.
Policy Expectations
Investors are watching the Communist Party's Politburo meeting in late July for signals on policy support. Economists expect mild easing measures, but a large stimulus package is unlikely due to resilient exports and Beijing's focus on curbing excess factory capacity. The Politburo may prioritize faster policy adjustments to address economic imbalances.
Economic Rebound Context
Industrial profits have rebounded sharply this year, swinging from barely positive growth in 2025 to double-digit gains. This recovery was fueled by an AI-driven boom in chip and equipment manufacturing and the end of nearly three years of factory-gate deflation. However, the reflationary boost appears fragile, as much of the price recovery was driven by surging global energy costs.