China’s industrial profits fall at faster pace in Jan-Oct

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BEIJING — Profits at China’s industrial firms fell at a faster pace in January-October as a resurgence of COVID-19 cases and a deepening property crisis weighed on factory activity and demand.

Industrial profits fell 3.0% in the first 10 months of 2022 from a year earlier, after a 2.3% slump in January-September, according to data from the National Bureau of Statistics (NBS) released on Sunday.

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The bureau has not reported standalone monthly figures since July.

With new COVID-19 cases in China hitting record highs and more cities imposing strict anti-virus measures, consumption is slowing sharply in the world’s second-largest economy, while exports are succumbing to cooler global demand.

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Some analysts now believe GDP could contract in the current quarter from the third quarter, and have cut their 2023 forecasts, predicting the path to reopening the economy will be slow and bumpy.

Analysts from Nomura now expect fourth-quarter GDP to shrink 0.3% from the preceding three months, and cut their fourth-quarter growth forecast on a year-on-year basis to 2.4% from 2.8%.

Likewise, analysts from Oxford Economics also cut their 2022 and 2023 GDP forecasts as they believe a broadening of lockdown measures is expected.

“Risks to our near-term outlook are now skewed to the downside. Our baseline view already incorporates a bumpy path towards a broader reopening in H2 2023, featuring episodic flare-ups in the near-term given seasonal vulnerabilities heading into the winter/flu season,” Oxford Economics analysts said.

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To prop up the faltering economy, authorities have rolled out a flurry of measures recently, including moves to ease some COVID curbs and provide financial support to the ailing property market, which have underpinned market sentiment.

On Friday, China said would cut the amount of cash that banks must hold as reserves for the second time this year, releasing about 500 billion yuan ($69.8 billion) in long-term liquidity.

Last month, China’s industrial output surged 5.0% from a year earlier, missing expectations for a 5.2% gain in a Reuters poll and slowing from the 6.3% growth seen in September.

Industrial profit data covers large firms with annual revenues above 20 million yuan from their main operations. ($1 = 7.1642 Chinese yuan renminbi) (Reporting by Liz Lee, Ella Cao and Liangping Gao; Editing by William Mallard and Kim Coghill)

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