China industrial profits soar on strong output, easing deflation

Macro policies should continue to deliver support for the economy and could be stepped up if necessary, it added.

Profits at Chinese industrial enterprises increased for the second straight month in September, as production revs up while declines in factory-gate prices ease amid a government campaign to rein in excess capacity.

Industrial profits in September rose 21.6% from a year earlier, according to data released Monday by the National Bureau of Statistics. That was far better than a Bloomberg Economics forecast for a 3.9% gain and followed a 20.4% jump in August. For the first nine months of the year, profits were up 3.2%.

Faster expansion in output is propping up earnings of Chinese factories and mines, as foreign demand remained robust despite US tariffs. Price declines also slowed in recent months, with the government acting to curb overcapacity and cutthroat competition.

That said, the actual strength of the recovery appears fragile for now, given a low comparison base last year.

Industrial profits posted deep declines in the four consecutive months through November when economic growth cooled rapidly, which eventually forced policymakers to respond with a package of stimulus measures.

Domestic demand has stayed stubbornly weak as investment shrank and the outlook for jobs remains gloomy, casting doubt on whether the earnings improvement can last.

In a communique released last Thursday after a key meeting, the ruling Communist Party pledged to “firmly achieve” this year’s economic growth target with a focus on stabilizing employment, companies, markets, and expectations.

Macro policies should continue to deliver support for the economy and could be stepped up if necessary, it added.

Over the past month, Chinese authorities have already announced additional funding support worth a combined 1 trillion yuan ($140 billion) to ramp up investment and strengthen local government finances.