China: Industrial profit growth fell in July – Nomura

Analysts at Nomura note that China’s industrial profit growth slowed to 16.2% y-o-y in July from 20.0% in June, mainly weighed on by price factors.

Key Quotes

“Lower PPI inflation but higher purchasing price index inflation of raw materials, fuel and power likely means shrinking profit margins in July, although industrial production growth was unchanged from June at 6.0%. This translates into industrial profit growth of 17.1% for JanuaryJuly, slightly lower than 17.2% in H1 (2017: 21.0%).”

“We believe industrial profit growth may slow further, as headwinds to growth remain (weakening end-demand, rising credit defaults, already-high financing costs, a problematic property market and escalating China-US trade tensions).”

“We continue to expect more policy/easing stimulus measures in the quarters ahead, but maintain our call for a visible slowdown of real GDP growth in Q3 before policy easing effects fully kick in.”