On Friday morning local time, China reported that industrial profits crash the most on record in January-February, both due to the Lunar new year, but mostly due to the virus outbreak and the government’s restrictive measures to contain the virus. In year-over-year terms, profit growth was -38.3%, the biggest drop on record, and far worse from the -6.3%Y/Y decline in December. On a seasonally adjusted basis, the average level of profits in January-February also declined materially by 22% (non-annualized) from the December level.
The decline in profits was bigger than the decline in industrial production in January to February, likely due to the fact that while production and sales were suspended, certain costs (such as labor and depreciation costs) remained.
Here are the key numbers:
Industrial profits: -38.3% yoy in January-February (-22.0% growth mom non-annualized, seasonally adjusted by GS); December: -6.3% yoy (-14.6% mom sa).
Industrial revenue: -17.7% yoy in January-February (-7.9% growth mom non-annualized, seasonally adjusted by GS); December: -3.3% yoy (-9.7% mom sa).
Commenting on the plunge in profits, Goldman notes that all major industries saw lower profits, led by automobile manufacturing where profits shrank by 79.6% yoy, and computer manufacturing industry where profits declined by 87%. Ferrous metal smelting and pressing profits dropped by 34.4% yoy.