China's industrial profits fall sharply in April amid lockdowns

China’s industrial profits fell sharply in April as Covid lockdowns took their toll, according to data released on Friday by the National Bureau of Statistics.

Industrial profits fell 8.5% on the year, making the fastest decline in two years. There is no official figure available for March, but according to calculations by Pantheon Macroeconomics, industrial profits rose 12.2%.

NBS senior statistician Zhu Hong said: "In April, frequent Covid-19 outbreaks were widespread in some regions, creating big shocks to the production and operations of industrial firms and leading to a drop in their profits."

Craig Botham, chief China+ economist at Pantheon Macroeconomics, said: "April saw a severe tightening of zero-Covid restrictions in China, and a steep drop in economic activity. It is unsurprising, therefore, that profits should also fall.

"The NBS do not provide a y/y number for March for 2022, but we estimate, using the year-to-date index, that industrial profits grew 12.2% year-on-year, so the -8.5% for April represents a stark turnaround. On a month-on-month basis, profits fell 3.4% in April, after growing 2.1% in March.

"The losses were fairly broad, in line with the application of factory closures and restrictions on movement. Particularly large y/y declines were reported for producers of machinery, electronic equipment, and firms supplying heat, gas, and water, industrial demand for which would have fallen off a cliff. Energy extraction still saw strong profit growth y/y, though slower than in March, as China battles to contain energy costs ahead of any reopening."