Wednesday, 22 of November of 2017

Economics. Explained.  

Corporate Profits

September 28, 2017

Corporate profits with inventory valuation and capital consumption adjustments rose 0.7% in the second quarter to $2,123.4 billion after having fallen 2.1% in the first quarter.  During the last year profits on this basis have risen 6.4%.  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 1.0% in the second quarter to $2254.3 billion after having risen 0.9% in the first quarter.  Over the course of the past year such profits have risen  6.2%.    A  large part of the earlier decline reflects weakness in one specific sector — the oil patch.   Without these huge declines corporate profits would have been much closer to the corporate profits reported in the past couple of years.

The economy will continue to climb at roughly a 2.3% pace in 2017, inflation will rise modestly, and interest rates will remain low.  As a result, corporate profits should climb at roughly a double-digit pace in 2017.

Stephen Slifer

NumberNomics

Charleston, SC


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