China economy Markets

Profits At China’s Industrial Firms Plunge A Laughable 38.3% Thanks To Annoying Virus

More smoldering wreckage.

It’s not clear how much utility there is in documenting each and every horrific data point out of China for January and February.

After all, the world’s second-largest economy was mostly shuttered, first for the Lunar New Year, and then due to the virus containment effort. PMIs dropped to the lowest levels in history.

Auto sales flatlined (almost literally), exports plunged, retail sales cratered and industrial production nosedived. It’s a total debacle.

But, again, this was to be expected. The length of the shutdown and the draconian nature of the containment protocols meant economic activity would simply cease altogether in the hardest-hit locales.

Still, one can’t help but marvel at the sheer scope of the declines, which is why it’s worth noting that data out Friday showed Chinese industrial companies’ profits diving 38.3% in January-February. Obviously, that’s a record.

It’s worth noting that this comes on the heels of a 6.3% decline in December. Why does that matter? Well, because that figure (the December decline) was a disappointment, coming as it did after a 5.4% bounce in November off October’s 9.9% swan dive, at the time the worst on record.

Factory gate prices in China first slid into deflation over the summer, a state of affairs which persisted, and served as a headwind for profits.

PPI deflation was extremely vexing for China’s industrial enterprises late last year, as they contended with lackluster demand on the home front exhibited in falling retail sales, contracting imports, diminished appetite for credit and the worst auto slump on record.

Clearly, all of that has been made immeasurably worse by the virus.

Coming full circle, there’s really not much to “analyze” in the case of the January-February data, though. The reason profits plunged is because companies weren’t producing.


 

3 comments on “Profits At China’s Industrial Firms Plunge A Laughable 38.3% Thanks To Annoying Virus

  1. Just a small reminder from The Perfect Storm:

    . After poor fishing, Captain Frank W. “Billy” Tyne Jr. headed east to the Flemish Cap, where he believed they would have better luck. Despite weather reports warning of dangerous conditions, Tyne set course for home on October 26–27.[2]

  2. Wait, they still have profits? How’d they pull that off?

  3. May the world be free from disease

Speak On It

Skip to toolbar