Profits of Industrial Enterprises above the scale fell by 3.7% in April

From March's 13.9% growth to April's 3.7% decline from the same period last year, many people were surprised by the obvious "reversal" in the growth of industrial enterprises'profits.

On May 27, the State Statistical Bureau released the latest industrial enterprise profit data, which showed that in April, the total profits of Industrial Enterprises above the national scale reached 515.39 billion yuan, down 3.7% from the same period last year (in terms of comparable caliber, the same below); in January-April, the total profits of Industrial Enterprises above the national scale reached 181.29 billion yuan, down 3.4% from the same period last year.

The profit growth rate of Industrial Enterprises above the scale in March announced in the previous month was as high as 13.9% year-on-year, which not only strongly boosted market confidence, but also led many people to make the judgment that the "turning point" of industry from downward to upward may have come. Nevertheless, since the monthly and cumulative growth rates of industrial and enterprise profits remained in the negative growth range in April, it seems that the overall operation of the industrial economy is still a long way from a full recovery.

In April, many leading indicators fell down

In April, the profit growth rate of Industrial Enterprises above scale was not satisfactory either year-on-year or year-on-year. In April 2018, the total profit of Industrial Enterprises above scale reached 576.03 billion yuan, an increase of 21.9% year-on-year. In March 2019, the total profit of Industrial Enterprises above scale reached 589.52 billion yuan, the same as that of the previous year. By comparison, the profit of enterprises in April 2019 was 515.39 billion yuan. Compared with the same period last year or the same period last month, the growth rate showed a trend of "from positive to negative".

Some experts told Daily Economic News that according to a series of leading data released earlier, the growth rate of industrial and enterprise profits in April was significantly lower than that in March, which is already a sign. Li Chao, chief Macro Analyst of Huatai Securities, combined with data, told reporters that profits of industrial enterprises declined by 3.4% from January to April of 2019, and the decline was slightly increased by 3.3% from January to March. From a single month point of view, in April, the profit growth rate of industrial enterprises was negative 3.7%, the former value was 13.9%, the decline was very obvious. Analysis of the reasons, "price rise" is difficult to rival "volume drop", demand-side pressure, especially the sharp fall in industrial value added in April, has become the dominant factor in the decline of profit growth.

The data released before showed that in April this year, the value added of industries above the national scale increased by 5.4% compared with the year before, and fell by 3.1 percentage points compared with March. The performance of other pilot data also points to the difficulty of continuing the positive growth trend of March in April. For example, according to data released by the National Bureau of Statistics, the purchasing managers index (PMI) of China's manufacturing sector in April was 50.1%, down 0.4 percentage points from last month. Although this data is still in the boom range of more than 50%, it is only 0.1 percentage point away from the line of prosperity and decline. The data of fixed assets investment published in the middle of May also show that the current industrial investment increased by 3.1% year-on-year, and the growth rate fell by 1.3 percentage points compared with January to March. Among them, the investment in manufacturing industry increased by 2.5% and the growth rate fell by 2.1 percentage points compared with January to March. Analysts believe that, combined with April manufacturing investment and private fixed assets investment data comprehensive analysis, the current industrial and manufacturing industry production and investment enthusiasm is relatively inadequate. It should also be noted that in April, the growth rate of profits of industrial enterprises declined significantly, which is closely related to the dislocation effect of production brought about by the landing of VAT tax reduction measures. Zhu Hong, a senior statistician in the Industry Department of the State Statistics Bureau, pointed out that due to the implementation of the VAT tax rate reduction on April 1, some industrial product demand was released ahead of time in March. In addition, the base of the same period was relatively high. In April, the profits of Industrial Enterprises above the scale fell by 3.7% compared with the same period last year, which fluctuated considerably compared with March. But in terms of average growth rate, profits in March and April increased by an average of 5.0%.

There are some industries where output increases and profit declines

According to the sub-item data, which industries'profits are not as expected, which has been a drag on the growth of industrial and enterprise profits since the beginning of the year?

According to the data released by the National Bureau of Statistics, in January-April, the total profits of 27 industries increased year on year, while 14 industries decreased. Among them, the total profit of three industries declined by more than 20%. From high to low, the oil, coal and other fuel processing industries declined by 50.2%. The ferrous metal smelting and calendering industries declined by 28.1%. The automobile manufacturing industry declined by 25.9%.

In combination with industry production data, the three industries where profits have declined substantially have more or less the problem of capacity exceeding demand. For example, in the smelting industry, the website of the National Development and Reform Commission recently announced that in the first quarter, the national crude steel output was 23.17 million tons, an increase of 9.9% year on year, and the growth rate increased by 4.5 percentage points year on year. But at the same time, the China Iron and Steel Industry Association also pointed out that during the same period, the benefit of iron and steel enterprises declined significantly, and the total profit decreased by 30.2% compared with the same period last year. Did the sharp decline in profit growth mean that these industries have already experienced overcapacity? What measures will be taken? In response to this, Meng Wei, a spokesman for the National Development and Reform Commission (NDRC), responded to questions posed by Daily Economic News reporters at a recent NDRC press conference. Overall, the current iron and steel industry is still running smoothly, and the utilization rate of capacity continues to remain within a reasonable range.

Next step, the NDRC will pay close attention to the overall operation of the iron and steel industry. On the one hand, we should continue to adhere to the principles of marketization and legalization and unswervingly implement the tasks of resolving the excess capacity of iron and steel, which violates the law.