China’s industrial profit growth continued to pick up in a single month, factory production picked up slightly, enterprise operating income picked up, and enterprise profit margin rose again. In terms of volume and price, production rebounded, prices were high, and corporate profits rose. From January to October, the growth rate of added value of Industrial Enterprises above Designated Size picked up slightly, and the growth rate of PPI continued to rise. As the rising speed of ex factory price is too fast, the rising speed of enterprise cost is inferior to that of ex factory price, and the profit margin of industrial enterprises is always high.
The inventory of finished products continues to rise. The inventory cycle has run to the stage of passive inventory replenishment and still not to the stage of active inventory removal. When the production growth slows down, the inventory is still up, which usually means the weakening of downstream demand, However, the reasons for the rise of production cost inventory this time are more complex: (1) the price of raw materials rose sharply, resulting in the rise of finished product inventory price, the rise of raw material inventory in mining industry, and the rise of inventory in chemical products and chemical fiber industry at the same time. The growth rate of finished product inventory in gas production and supply in September was 46.7%, which is the result of gas price rise; (2) The logistics is still blocked, which slows down the delivery speed of the factory, and the finished product inventory of electronic instrument industry, electrical machinery and equipment manufacturing industry is at a high level, indicating that the logistics is still hindered at this stage; (3) the relatively weak consumption also makes the cycle tend to “passively replenish inventory” 。 China’s total retail sales of social consumer goods are low, and inventories of textile industry, garment industry, furniture industry and automobile industry are up. (4) Some manufacturers began to stock goods during the Spring Festival, making the inventory of finished products rise.
The production growth rate rebounded at a low level and the inventory rose, but the terminal demand was slightly weak, the ex factory price fell rapidly, and the profit growth rate will continue to fall in the future. The monthly profit of this month exceeded 800 billion, which is at a historically high level. However, the downward price makes the profit recovery only temporary, and it is difficult for the profits of industrial enterprises to continue to rise. The following actors will remain in the future. The rise of raw material prices in October is unsustainable, and the prices of raw materials have fallen sharply in November. Industrial profits will continue to decline after a brief rebound in October. The profit growth rate of industrial enterprises will gradually decline. The annual growth rate is expected to be about 35% in 2021 and about – 1.5% in 2022.
The price rise of upstream industries is difficult to maintain. In October, the profit of upstream industries accounted for 12.1% of the profits of Industrial Enterprises above designated size. The profit proportion of the mining industry reached an all-time high in October, which is difficult for the downstream to bear. In mid October, the national development and Reform Commission held consecutive meetings to solve the bottleneck problem of coal supply. In late October, the price of thermal coal fell rapidly. By November, the price of thermal coal had dropped to 50% of its peak, and other commodity prices also showed a correction.
The profits of the coal industry soared and became more concentrated. The profits of the coal industry reached 134.1 billion yuan, which is difficult to maintain. The profits of industrial enterprises are excessively concentrated in the top ten industries, which has suppressed the production of other industries. The proportion of raw materials in the industrial industry is at a high level, and the profits of downstream industries are difficult to improve.
