EARNINGS at China’s industrial firms in November dropped for the first time in nearly three years, as slackening external and domestic demand left businesses facing more strain in 2019 in a sign of rising risks to the world’s second-largest economy.

The gloomy data point to a further loss of economic momentum as a trade dispute with the United States piles pressure on China’s vast manufacturing sector and as firms, bracing for a tough year ahead, shelve their investment plans, executives say.

Industrial profits fell 1.8 percent in November from a year earlier to 594.8 billion yuan (US$86.33 billion), the National Bureau of Statistics (NBS) said on its website Thursday. It marked the first decline since December 2015.

The fall in profits largely reflected slowing growth in sales and producer prices as well as rising costs, He Ping of the statistics bureau said in a statement accompanying the data.

Economists expect earnings to continue to worsen next year, weighed down by smaller gains in industrial prices due to cooling demand, with some even warning of the risk of deflation.

“Soft economic indicators such as producer prices, industrial output and orders all point to further pressure on corporate profitability,” said Nie Wen, a Shanghai-based analyst at Hwabao Trust, adding that firms’ revenues have been hit by shrinking demand.

“Industrial profits next year might very well post a 5-10 percent decline on average.”

In November, China’s factory price growth slowed to the weakest pace in two years as domestic demand lost further momentum.

(SD-Agencies)