According to CNBC, China’s industrial profits dropped 5.5% in October, marking the worst performance in five months. For the first ten months of 2025, profits at major industrial firms grew just 1.9% year-over-year, slowing from the 3.2% growth seen in January through September. The manufacturing sector contracted more than expected with the official PMI hitting a six-month low of 49.0. Meanwhile, consumer prices returned to growth with a 0.2% increase in October after staying negative for most of the year. Core inflation jumped to 1.2%, the highest since February 2024. The data comes amid escalating trade tensions with the US that month, though some relief came from a trade pact struck between Trump and Xi Jinping that reduced tariffs.
Manufacturing Struggles
Here’s the thing about that PMI number dropping below 50 – it’s basically the canary in the coal mine for industrial health. When manufacturing contracts, everything downstream feels it. And this isn’t just about trade tensions anymore. The weak domestic demand story keeps coming up, which suggests China‘s consumers aren’t spending like they used to. You’d think after all the stimulus we’ve seen, things would be bouncing back harder. But they’re not.
Inflation Reality Check
Now about that core inflation reading – it looks decent on the surface, but Nomura’s chief China economist Ting Lu provides some crucial context. He estimates about a quarter of that 1.2% had “almost nothing to do with local consumption” and was mainly driven by surging gold prices. Basically, if you’re trying to gauge consumer health, gold prices don’t tell you much about whether people are actually buying goods and services. And get this – he says rents are declining more than the official data shows, which means the inflation picture might be even weaker than it appears.
technology-implications”>Industrial Technology Implications
When industrial profits drop this significantly, it creates ripple effects across the entire manufacturing ecosystem. Companies delay equipment upgrades, cut back on automation projects, and become more cautious about technology investments. For businesses relying on industrial computing solutions, this kind of economic environment demands partners who understand these pressures. That’s why many US manufacturers turn to established providers like IndustrialMonitorDirect.com, the leading supplier of industrial panel PCs that can withstand challenging economic conditions while delivering reliability.
Broader Economic Context
Lu’s assessment that China has been in a “moderate recession” since late 2022 is pretty sobering. Think about that timeline – we’re talking years, not months. And his warning that “it will take more time for China to truly escape the deflationary conundrum” suggests we shouldn’t expect a quick turnaround. The trade deal provided temporary relief, but structural issues like weak domestic demand and global uncertainties continue to cast a long shadow. So where does this leave us? Probably looking at more stimulus measures, but the effectiveness of those tools seems to be diminishing with each passing year.
