China’s Industrial Profit Gains Dip in Sign of Economic Weakness
The increase in China’s industrial profits softened for the first time since November, suggesting that strong exports and price gains failed to offset the drag from tepid domestic demand.
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(Bloomberg) — The increase in China’s industrial profits softened for the first time since November, suggesting that strong exports and price gains failed to offset the drag from tepid domestic demand.
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Industrial profits rose 21.1% last month from a year earlier, down from a 24.7% jump in April, according to data published by the National Bureau of Statistics on Saturday.
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For the first five months of the year, companies increased earnings by 18.8%, compared with a Bloomberg Economics forecast of 19%.
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The slowdown is a surprise because China exited factory deflation in March after more than three years, with producer prices rising last month at the fastest pace since 2022. The AI investment binge has fueled demand for China’s advanced manufactured goods, while disruptions to energy markets caused by the Middle East conflict lift commodity costs.
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But the renewed weakness suggests that slumping domestic investment and softer household spending still weigh heavily on the corporate bottom line, negating those positive tailwinds.
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The actual strength of profit growth warrants even more caution, considering last year’s low comparison base inflated the headline figure. Industrial earnings plunged 9.1% in May last year.
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For the first five months of 2026, the total value of profits was 3.14 trillion yuan ($462 billion), less than what companies earned in the same period of 2022.
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“The problem of strong supply and weak demand within the country remained outstanding and companies in some industries were still facing difficulties,” Yu Weining, an analyst with the NBS, said in a separate statement.
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—With assistance from Jon Herskovitz.
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