China: Industrial profit growth drops further in November – Nomura

China’s industrial profit growth continued to moderate in November, falling to 14.9% y-o-y from 25.1% in October, notes the research team at Nomura.

Key Quotes

“Also, official profit growth has again diverged from profit growth calculated based on profit value, as the latter dropped more sharply by 19.5 percentage points (pp) to 1.5% y-o-y.”

“In year-to-date terms, industrial profit growth ticked down by 1.4pp to 21.9% y-o-y in November. By ownership, the moderation of industrial profit growth was broadly based, with state-owned and collective-owned enterprises recording the most visible slowdown.”

“More essentially, it was falling price inflation that dragged down industrial profit growth in November. According to estimates by the National Bureau of Statistics of China, falling price inflation contributed -13.8pp to the slowdown of industrial profit growth, which is more than its actual moderation in November (10.2pp).”

“In our view, industrial profit growth may continue to moderate in coming months, given the high base and the outlook of weakening investment demand. We maintain our forecast for real GDP growth to ease to 6.6% y-o-y in Q4 2017 before falling to 6.4% in 2018.”