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China’s industrial profits rebounded sharply in December, beating expectations and offering early signs of easing deflationary pressure.Summary:China industrial profits rose 5.3% y/y in DecemberGrowth beat expectations for a sharp declineProducer price deflation eased to a one-year lowDecember rebound snapped a two-month contractionFull-year profits rose for first time since 2021China’s industrial profits returned to growth in December, snapping a two-month contraction and coming in well above market expectations, according to official data released on Tuesday.Figures from the National Bureau of Statistics showed industrial profits rose 5.3% year-on-year in December, sharply outperforming expectations for an 11% decline. The rebound was supported by easing price pressures, with producer prices recording their smallest annual fall in more than a year.The improvement suggests margins across parts of the industrial sector may be stabilising after prolonged deflationary pressure, offering tentative signs that policy support and improving demand conditions are gaining traction late in the year.For 2025 as a whole, industrial profits increased 0.6%, marking the first annual rise since 2021 and ending a multi-year period of earnings contraction. While the pace of growth remains modest, the return to positive territory is likely to be welcomed by policymakers seeking to reinforce confidence in the industrial sector.However, analysts caution that the sustainability of the rebound will depend on further progress in demand recovery and a continued easing in producer price deflation, which has weighed heavily on corporate profitability in recent years.
This article was written by Eamonn Sheridan at investinglive.com.
💡 DMK Insight
China’s industrial profits rising 5.3% y/y in December is a game-changer for traders: This rebound not only defies expectations but also signals a potential shift in the broader economic landscape. Easing deflationary pressures could lead to increased consumer spending and investment, which are crucial for sustaining growth. For traders, this means keeping an eye on related sectors, particularly commodities and manufacturing stocks, which might see a boost as demand picks up. The easing of producer price deflation to a one-year low is also noteworthy; it suggests that input costs are stabilizing, which could improve margins for companies. However, it’s worth questioning whether this rebound is sustainable. Seasonal factors often play a role in December performance, and the real test will be how these profits hold up in the coming months. Traders should monitor key levels in the Shanghai Composite Index and related ETFs for signs of bullish momentum. Watch for any shifts in policy from the Chinese government that could further impact industrial output and profitability in Q1 2024.
📮 Takeaway
Keep an eye on the Shanghai Composite Index for bullish signals, especially if industrial profits continue to rise in early 2024.
