Wednesday, 20 of June of 2018

Economics. Explained.  

Corporate Profits

March 28, 2018

Corporate profits with inventory valuation and capital consumption adjustments fell 0.1% in the fourth quarter to $2212.5 billion after having risen  4.3% in the third quarter.  During the last year profits on this basis have risen 2.7%.  The IVA and CC adjustment deals with the difference in depreciation allowances used for accounting and income tax purposes.  Hence, changes in tax laws impact this series and it does not accurately reflect profits from current production.

Corporate profits without such adjustments, or profits from current production, fell 8.9% in the fourth to $2125.8 billion after having risen 3.5% in the third quarter.  Over the course of the past year such profits have fallen 5.8%.

The economy climbed at a 2.6% pace in 2017 and 2.9% in 2018, inflation will rise modestly, and interest rates will remain low.  In addition, corporate profits will benefit from a cut in the tax rate, and by a significant reduction in their regulatory burden.  As a result, corporate profits should climb at roughly a double-digit pace in 2018.

Stephen Slifer

NumberNomics

Charleston, SC


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