China industrial profit growth slows again in June as retreating oil prices sap earnings lift

China's industrial profits rose 15.1% in June from a year earlier, according to data released Monday by the National Bureau of Statistics, slowing for a second straight month as easing energy prices took the edge off the price gains that had driven this year's rebound.

The June figure extended a two-month deceleration, after May's 21.1% gain marked the first slowdown since November.

For the first half of this year, profits climbed 18.7%, slowing from the 18.8% pace recorded in the January-May period .

Industrial corporate earnings have staged a notable turnaround this year, swinging from barely positive growth in 2025 to double-digit gains, as an artificial intelligence-fueled boom in chip and equipment manufacturing coincided with the end of nearly three years of factory-gate deflation.

The recovering profit has also been helped by a favorable comparison with last year. Earnings fell 3.6% in June last year and declined 2.8% in the first half of 2025.

Factory-gate prices also rose 3.6% year on year in the second quarter, the first positive reading since late 2022.

That reflation boost appears wobbly, as much of the price recovery was driven by surging global energy costs, while domestic demand lags, economists say.

Producer prices dipped 0.3% month-on-month in June, the first decline since July 2025, according to LSEG data, as normalizing tanker flows through the Strait of Hormuz pulled oil, refined-fuel, and petrochemical prices lower.

Investors will now turn to the Communist Party's Politburo meeting, traditionally held in late July, where top leaders will review first-half performance and set policy direction for the rest of the year.

Economists anticipate stronger easing language after the second-quarter slowdown, though expectations for a large stimulus package remain low, as Beijing refrains from more forceful action given resilient exports and its focus on curbing excess factory capacity.

"The Politburo is likely to make policy support mildly more urgent, prioritizing faster fiscal rollout," said Robin Xing, chief China economist at Morgan Stanley, pegging their baseline as a "gradual policy ramp-up rather than a one-off stimulus push."

"Growth should stay resilient thanks to exports, even as domestic demand lags," Xing said, citing the AI-driven investment cycle — in which China is a key hardware supplier — and a broader Asian industrial capex super-cycle that is now unfolding.

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