(Yicai Global) July 27 -- Profit at China’s industrial firms rose last month from a year earlier, ending a two-month decline, as production resumed and stimulus policies continued to take effect.

Profits at industrial companies with an annual turnover of at least CNY20 million (USD2.9 million) rose 0.8 percent in June, up 7.3 percentage points from the previous month, data from the National Bureau of Statistics showed today. The figure for the first half rose 1 percent.

Thanks to the rapid resumption of output in the auto manufacturing centers of Shanghai and Jilin, carmakers reported a nearly 48 percent surge in earnings, reversing declines and contributing the most to the rebound in overall industrial profits.

Surging profits at equipment makers, especially car manufacturers, was an important part of the pick up in profits last month, according to Zhu Hong, a senior NBS statistician.

Benefiting from a recovery in supply chains, profits at equipment producers rose 4 percent, compared with a 9 percent drop in May, Zhu added, noting that the gain contributed 4 points to monthly profit growth at industrial enterprises.

Profits are expected to continue to recover in the short term as production resumes and stimulus polices work through, Wu Chaoming, vice president of Chasing Research Institute, told Yicai Global. But the inadequate recovery of domestic consumption coupled with falling real estate investment and sales will limit the pick up in industrial production and better earnings, he added.

The recovery in the earnings of industrial firms has accelerated, and positive changes are noticeable in the structure of profitable industries, the NBS’s Zhu said. But under a more complex and severe external environment, profit growth remains low, with some companies still facing difficulties in production and operations.

The government should continue to promote the implementation of policies and measures to stabilize the industrial economy, continue to expand effective investment, boost consumer demand, deepen tax cuts and fee reductions, and bail out firms to create more favorable conditions for the sustained and stable recovery of the industrial economy, Zhu said.

Industrial profits are expected to rebound further in the second half, while the profit structure and downstream share are likely to continue to improve, according to Zheshang Securities.

Editors: Shi Yi, Futura Costaglione