J.P. Morgan Update Post The Weekend Profit Data
The US banks sees risks the pace of industrial profits growth will moderate further.
J.P. Morgan: "China’s industrial profits fell 3.5%oya in March. The National Bureau of Statistics (NBS) announced that total industrial profits (including all industrial companies with annual sales from principal business exceeding 20 million yuan) grew 4.3%oya in January-March, down from 10.2%oya growth in Jan-Feb. The mid-single-digit growth rate came off a low base, as industrial profits fell 21.4%oya in Jan-Mar 2023. For the month of March, the NBS estimated that industrial profits fell 3.5%oya."
"Looking ahead, the pace of industrial enterprise profits growth may moderate. Domestically, supportive policy measures continue to focus on manufacturing sector (industry upgrade, core technology, NEV, green economy, AI, etc.), helping to boost manufacturing FAI and production activity. Given stronger-than-expected 1Q GDP, the probability of additional stimulus (vs policy announcement in the March NPC meeting) is low. On the other hand, policy tightening has dragged some sectors, most notably housing market but also in a few services sectors. On the consumption side, there have only been modest, product-specific measures to encourage consumer spending. The uneven industry policy has contributed to structural imbalances, which in turn leads to prolonged demand-supply imbalances and lingering deflation pressure. We think the relative softness in nominal GDP as observed since 2H23 will likely continue in the coming quarters. Thus, the pass-through from improved real activity to improved corporate earnings will still take time. On the external front, we look for relatively steady growth in China’s export activity for 2024."