China May industrial profits 0.7 yy vs 4 in April
Soft domestic demand crimps business activity
Slow profits growth highlights broad economic struggles

BEIJING, June 27 Reuters China39;s industrial profits rose at a sharply slower pace in May, official data showed on Thursday, underlining the struggles faced by the world39;s secondlargest economy as weak domestic demand crimps overall growth.

Earnings rose 0.7 yearonyear last month after a 4 increase in April while gains over the first five months also eased to 3.4 from 4.3 in the JanuaryApril period, according to National Bureau of Statistics NBS data.

The closely watched gauge of business conditions follows a flurry of largely downbeat economic indicators in May.

While exports were strong, China39;s vast property sector has failed to respond to a historic rescue package announced last month, weighing on other sectors from makers of construction materials to household goods, and denting overall consumer confidence.

Effective domestic demand remains insufficient … and the foundation for recovery of industrial profits isn39;t solid as yet, NBS statistician Yu Weining said in an accompanying statement.

Yu attributed the slower growth to shortterm factors including a decline in investment proceeds growth.

The automobile industry, a major contributor to consumer discretionary growth, had a profit margin of 4.6 in the first four months, underperforming an average of 5 in the overall factory sector, data from the…