Industrial Profits Improve in May, but Sectoral Divergence Persists

Industrial enterprise profits rose by 21.1% year-on-year in May, slightly down from April’s 24.7% but still higher than the 15.5% growth recorded in Q1. Revenue growth continued to accelerate during the same period, indicating an overall improvement in corporate profitability. Industries linked to energy and AI supply chains were the main drivers of profit growth. The prolonged blockade of the Strait of Hormuz—now exceeding three months—has deepened supply-side disruptions, further reducing capacity utilization among some mid- and downstream enterprises and exacerbating profit divergence across sectors. Despite a marginal decline in oil prices in May, upstream petrochemical sectors maintained high profit growth rates. Buoyed by robust global AI investment demand, the electronic computing sector continued to drive both profit and revenue growth, increasing its contribution to industrial profit growth from 6.7 percentage points to 9.6 percentage points. Non-ferrous metal smelting and chemical products contributed 6.4 and 4.2 percentage points, respectively. Together, these three sectors accounted for approximately 20.2 percentage points of the total profit growth. In contrast, downstream manufacturing sectors tied to domestic demand showed weaker profit growth, with industries such as automobiles and furniture manufacturing experiencing further widening declines in profits.