China May industrial profit growth slows to 3.7 percent year-on-year

BEIJING (Reuters) - Profits of Chinese industrial companies rose 3.7 percent in May from a year earlier, slowing from April's pace and adding to concerns that the world's second-largest economy may be losing some momentum. A return to profit growth in the first quarter and a strong jump in March in particular had fuelled hopes that China's economy was perking up, but data since then has suggested it may be stabilising at best. "The continued slowdown in May profit growth further supports our view that growth momentum has remained weak or possibly weakened further," economists at Nomura said in a note. "We maintain our forecast for a slowing of real GDP growth to 6.3 percent year-on-year in Q2 from 6.7 percent in Q1." Profits in May rose to 537.2 billion yuan (61 billion pounds), the statistics bureau said on Monday. In the first five months of this year, profits rose 6.4 percent compared with the same period last year, the National Bureau of Statistics said on its website. But the performance was uneven across sectors, with profits in the mining sector falling 93.8 percent from a year earlier, the bureau said. Industrial profits in January-April rose 6.5 percent from a year earlier, with April up 4.2 percent. "Growth in industrial profits slowed down slightly in May compared with the previous month, but positive changes have emerged from the industrial sectors," NBS official He Ping said in a statement accompanying the data. He added that profits of energy and raw material sectors including coal, steel and non-ferrous industries saw a resumption of growth in May. In May, profits of the coal mining sector grew 2.5 times from a year earlier, snapping a falling streak over the past few years, the bureau said. The pick-up in profits in these sectors might be an indication that Beijing's efforts to remove excessive capacity, particularly in the coal and steel sectors, may be starting to have an effect. The central government will earmark 27.64 billion yuan to help local governments pay for capacity closures in these two sectors this year. China's top economic planner said on Sunday that it planned to cut steel capacity by 45 million tonnes and lower coal output capacity by 280 million tonnes. Chinese industrial firms' debt at the end of May was 4.9 percent higher than at the same point last year. The data covers large enterprises with annual revenue of more than 20 million yuan from their main operations. Profits at China's state-owned firms fell 9.6 percent in the first five months of 2016 from a year earlier, wider than the a 8.4 percent fall in the first four months, the Ministry of Finance said last week. Producer prices fell at their slowest rate in May since November 2014, supported by a government investment spree and higher commodity prices. On a monthly basis, producer prices rose 0.5 percent, the third increase in a row. ($1 = 6.6150 Chinese yuan renminbi) (Reporting By Winni Zhou and Nicholas Heath; Editing by Kim Coghill)