China’s industrial profits slipped in the opening months of the year, official data showed Thursday, as enterprises navigate persistent deflationary pressure and rising global trade tensions.

Profits at major industrial firms dipped 0.3% in the first two months this year, after three consecutive years of sharp declines, supported by improved profitability in manufacturing and raw material sectors.

In December, profits rebounded 11% year on year, snapping four consecutive months of declines, signaling Beijing’s stimulus measures since late September have been trickling through the economy though the latest data clouds the picture.

“The mood on Chinese economy is definitely improving,” Robin Xing, chief China economist at Morgan Stanley, told CNBC’s “Street Signs Asia” on Thursday. The Wall Street bank has raised its forecast for China’s economic growth this year to 4.5% from 4.0%.

“However, it is still showing a mixed bag,” he said, adding that “corporate profit is still lagging and consumer sentiment is still at subdued levels.”

State-backed industrial companies saw their bottom-line grow 2.1% in the first two months and those with foreign investments saw profits rise 4.9%, according to official data.

Profits in the manufacturing sector and utilities industry — electricity, heat, gas and water supply — increased by 4.8% and 13.5% from a year earlier, respectively. However, profits at the mining industry plunged 25.2% from a year ago.

Yu Weining, a statistician at the National Statistics Bureau, attributed the smaller decline to the expansion of Beijing’s consumer goods trade-in and equipment upgrade policy. “Profitability improved in the corresponding industries and enterprises in those supply chains,” Yu said, according to CNBC translation of the Chinese statement.

Yu cautioned that some operating challenges still persist amid “a more challenging external environment.”

U.S. President Donald Trump has imposed 20% additional tariffs on Chinese goods in just a little over two months in office. He announced on Wednesday night stateside auto tariffs of 25% on cars “not made in the U.S.,” starting April 2.

Beijing has set an ambitious growth target of “around 5%” for this year, a target that analysts say will require stronger stimulus measures to offset the impact from higher U.S. tariffs.

Chinese policymakers rolled out multiple rounds of stimulus measures in the second half of last year, including expanding a consumer goods trade-in program to boost demand that helped the country meet its official growth target of “around 5%.”

A slew of Wall Street banks have turned more upbeat on the country’s outlook this year, citing green shoots in the economy, while acknowledging headwinds from tariffs remain on the horizon.

“Tariff on China could be higher, stickier, and it’s harder to negotiate down,” Morgan Stanley’s Xing said, stressing that Beijing will need to step up domestic stimulus as a countermeasure to external shocks.

Over the past month, economists at HSBC, ANZ and Citi have raised projections for China’s GDP growth this year to 4.8%, 4.8% and 4.7%, respectively, from their previous forecasts of 4.5%, 4.3% and 4.2%.

Retail sales rose 4% in the January-February period from a year ago, a faster pace than December, while fixed asset investment and industrial output both grew more than expected.

However, exports, which contributed nearly 20% to China’s GDP last year, lost some momentum at the start of this year as the front-loading by exporters ahead of new tariffs under Trump’s second presidency showed signs of tapering off.

Consumer price index in February fell into negative territory for the first time since early last year as households remained cautious amid a prolonged real estate slump.

The nationwide unemployment rate rose to its highest in two years at 5.4% last month while urban jobless rate for 16- to 24-year-olds, excluding students, rose to a four-month high of 16.9%.