China industrial profits declining

China profits at major industrial firms declined -0.3% yoy in June (vs. +0.6% in May). The decline of corporate profitability is putting pressure on highly leveraged companies that face large excess capacity and weaker demand.  

Global industrial companies (in particular the auto sector) suffered from economic headwinds in China in H1 and performance will strongly depend on potential stabilisation of economic growth in H2.  The rebound of retails sales in June (+10.6% yoy) show that consumption is holding up, as confirmed by the strong rebound in the services PMI in July (53.8).