PROFITS earned by China’s industrial firms contracted in June after a brief gain the previous month, fuelling concern that a slowdown in manufacturing from a trade war will drag on economic growth.

Industrial profits fell 3.1 percent in June from a year earlier to 601.9 billion yuan (US$87.5 billion), according to data released by the National Bureau of Statistics (NBS) on Saturday, following a 1.1 percent gain in May.

In the first six months of the year, industrial firms earned profits of 2.98 trillion yuan, down 2.4 percent from a year earlier, compared with a 2.3 percent drop in the January-May period.

The drop in first-half profits was driven by declining profits in the auto, oil processing and steel sectors, Zhu Hong of the statistics bureau said in a statement accompanying the data.

Producer price inflation, one gauge of industrial profitability, eased to zero in June from a year earlier, rekindling worries about deflation, which could prompt authorities to launch more stimulus measures.

June marked the first full month of higher U.S. tariffs on US$200 billion of Chinese goods.

Saturday’s data showed that profits from the construction material and machinery industries helped cushion the fall in overall profits in the first half, likely due to higher government spending on infrastructure, which has supported some companies, such as railway equipment makers, miners and metal producers.

Sany Heavy Industry Co. said this month that it expected first-half profits to jump 91.8-106.6 percent from a year earlier.

However, earnings for telecommunications and electronic equipment manufacturers, which are more vulnerable to U.S. tariffs than other product classes, declined 7.9 percent in the first six months of the year.(SD-Agencies)