China Is Coming Under More And More Pressure To Stimulate After A Decline In Industrial Profits


Photo: ABC News (screenshot of a report)

Another sign of something that might resemble a hard landing in China: Industrial profits fell 5.2% in China over the January-February period. The last time there was a YOY decline like this was 2009.From Nomura:

This is consistent with our view that pressure is building in Beijing to loosen policy further and support domestic demand. We believe the government needs to cut interest rates and push investment projects in coming months. Reserve requirement ratio (RRR) cuts would only help to increase loan supply, not solve the problem of weakening demand.  

One quick point. China watchers like to watch the January-February period, since the Lunar New Year slows things down, and since the date floats from one year to another, frequently crossing over a part of both months.

And so theoretically the Jan-Feb period eliminates this issue, but we’ll note that this year was the Year Of The Dragon, which is the biggest Lunar New Year of them all, so it may be impossible to do a perfect year-over-year comparison for this period. March numbers will be cleaner and more telling.

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