BEIJING, June 28 (Xinhua) -- China's major industrial firms in May reported a smaller profit decline for a third straight month in the latest signal of steady industrial recovery, data from the National Bureau of Statistics (NBS) showed Wednesday.

Industrial firms with an annual main business revenue of at least 20 million yuan (about 2.77 million U.S. dollars) saw their combined profits stand at 635.81 billion yuan last month, down 12.6 percent from a year ago, narrowing from the 18.2 percent drop in April.

Industrial production continued to improve, and business profits maintained the recovery trend last month, said NBS statistician Sun Xiao. Wednesday's data exceeded market expectations, said Wen Bin, chief economist of China Minsheng Bank.

In May, the manufacturing sector posted better performance thanks to an array of supportive policies, with its profit decline narrowing by 7.4 percentage points from April. Equipment manufacturers saw combined profits rise 15.2 percent last month, and the profit decline of consumer goods producers shrank by 17.1 percentage points.

Meanwhile, the power, heating, gas, and water supply sectors saw rapid growth, with their profits up 35.9 percent from a year earlier.

Sun, in particular, cited a vibrant automobile industry as surging new energy vehicle sales helped make the sector's profits more than double. The textile and garment sector also witnessed marked improvement, with 47 percent profit growth.

In the first five months, the profits of Chinese industrial firms went down 18.8 percent year on year, narrowing by 1.8 percentage points from the January-April period, according to the NBS data. The aggregate revenue of these firms edged up 0.1 percent.

Looking forward, analysts believe the industrial profit decline will continue to narrow as the producer price index is expected to bottom out in the middle of the year, and government policy support will help drive up factory production.

However, Sun acknowledged that the foundation of industrial firms' recovery is still not solid enough due to a more complicated and grim external environment and inadequate domestic demand.

The statistician called for more efforts to build up growth momentum and shore up the recovery of the industrial economy.