BEIJING (Reuters – China’s industry firms saw profits rise at a quicker pace in January-February according to Sunday’s official data. The figures are in line other signs of economic momentum, but the outlook is clouded due to the COVID-19 epidemics within the country and the ongoing conflict with Ukraine.

According to the National Bureau of Statistics, profits rose by 5.0% from last year and 4.2% in February compared to December’s gain of 4.2%.

Due to the higher price of commodity commodities, such as coal and oil, January and February saw a significant increase in growth.

However, the downstream profit growth of other industrial companies has been limited by high raw materials costs. It is now in single digits and will not improve until November.

The increase in industrial profits was slightly slower than the improvements in industrial output and retail sales in January-February. It suggests that the recent policy changes were already starting to show results.

Yet, this year has seen new challenges, such as the largest outbreak of COVID-19 since 2020 in China. This is threatening local economies and could further dampen consumer spending.

The uncertainty created by global upheavals like the Ukraine war has also affected international supply chains. There is the potential for higher commodity and fuel prices. These could impact Chinese businesses’ bottom lines.

Vice Premier Liu He declared last week that Beijing will implement measures to improve the economy’s performance in the first quarter, and that monetary policies would be established to promote growth.

China pledges 1.5 trillion Yuan worth of Value Added Tax (VAT), rebates to help smaller companies ease their financial burdens.

The finance ministry announced that China would exempt 3% VAT from some small businesses, which is the main source of employment in the country, on Thursday.

Industrial profits are data from the statistics bureau that covers big firms with revenues exceeding 20 million yuan per year.

($1 = 6.3658 renminbi)