More than 70% of the 41 major industries realized year-on-year profit growth

On October 27, the financial data of industrial enterprises released by the National Bureau of statistics showed that in the first three quarters of 2019, the total profits of Industrial Enterprises above designated size decreased by 2.1% year on year. Among them, the decline in the first quarter was 3.3%, the second quarter was 1.9%, and the third quarter was 1.8%, showing a trend of narrowing quarter by quarter. Zhu Hong, Senior Statistician of the industry department of the National Bureau of statistics, said that the structural improvement of industrial enterprise benefits in the first three quarters was mainly reflected in the following aspects: first, the increase of profit growth industries; second, the acceleration of profit growth in high-tech manufacturing industry and strategic emerging industries; third, the recovery of profit in the automotive electronics industry led to the negative to positive growth of profit in the equipment manufacturing industry. The specific data shows that from January to September, profits of 30 industries in 41 major industries increased year-on-year, accounting for more than 70%, two more than from January to August.

Among them, the profits of power and heat production and supply industry, non-metallic mineral products industry, electrical machinery and equipment manufacturing industry, wine and beverage and refined tea manufacturing industry increased by 13.7%, 11.8%, 13.5% and 17.2% respectively year on year. At the same time, from January to September, the profits of high-tech manufacturing industry and strategic emerging industry increased by 6.3% and 4.6% respectively, 3.5% and 1.6% respectively. From January to September, the profit of automobile manufacturing industry decreased by 16.6% year-on-year, 2.4% lower than that from January to August; the manufacturing industry of computer communication and other electronic equipment decreased by 2.7% from January to August, and increased by 3.6% from January to September. Affected by the profit recovery of the above two industries, the profit of equipment manufacturing industry decreased by 0.7% from January to August, and increased by 0.9% from January to September. Zhu Hong said that in September, industrial enterprises' profits fell by 5.3% year-on-year, and the drop was larger than that in August, mainly affected by factors such as the expansion of the drop in the factory price of industrial products and the slowdown in sales growth. In general, price variable (PPI) may be the key factor influencing the future growth of industrial enterprises' profits, even the economic cycle deduction, said Huang Wentao, chief analyst of China Construction securities macro bond.

From the perspective of aggregate data, the recovery of profit margin, the temporary stabilization of industrial added value and the fall of PPI are the main factors that drag down the profit growth of industrial enterprises in September. From the perspective of industry structure, the drag effect of iron and steel industry on the overall profit is expanding, and the drag effect of automobile industry is narrowing. Based on the prediction of base effect and seasonal effect, the rhythmic bottom of PPI may appear in the fourth quarter. Combined with the logical relationship between inventory cycle and PPI, as well as the location of current inventory cycle, the rhythmic bottom is also expected to become the cycle bottom. If the cycle end of PPI is confirmed, there may be a deduction path of PPI recovery, profit expectation improvement, production recovery and profit recovery in the future. According to Huang Wentao, considering the recent recovery of leverage ratio of the enterprise sector and the financing support of policies for manufacturing enterprises, the low profit cycle is the main factor restricting the recovery of manufacturing investment. If the future profit growth and profitability improve periodically, it is expected to release the endogenous investment momentum of the entity enterprises.