USA: continuing trend of robust recovery in profits

  • NIPA corporate profits rose by 9.7% q-o-q annualised in Q4 10, slightly higher than in Q3 (+6.6%)
  • Profits from financial corporations bounced back further sharply q-o-q but non-financial profits actually declined modestly

The third estimate of Q3 GDP data was accompanied by a set of economy wide statistics on corporate profits in a National Accounts perspective. Specificities of this set of data made them quite different from the usual numbers aggregated from reported corporate financial statements.

Corporate profits up 29.2% in 2010
Corporate profits rose by $38.2bn q-o-q in Q4 10 (+9.7% annualised), following +$26.0bn in Q2 (+6.6%). Year-on-year, profits were up a solid 18.3% and, since bottoming in Q4 08, they have risen by 68.7%, i.e. at an average of 29.9% per year. Profits have at last topped their previous peak reached in Q3 06, although by a small margin (1.4%). On average in 2010, profits increased by 29.2%, following a contraction of 0.4% in 2009.

Net profits coming from abroad fell back in H2 10
The rest-of-the-world components of corporate profits actually fell back further q-o-q in Q3 10 (-9.5% annualised), following a drop of 8.8% in Q3. This was more than compensated by domestic profits, which rose by 16.0% q-o-q annualised in Q4 10, following +12.0% in Q3.

This modest improvement was linked to a sharp acceleration in profits from financial corporations (+78.9% q-o-q annualised, following +48.3% in Q3), whereas the pace of increase in profits from non-financial corporations actually eased slightly q-o-q in Q4 (-1.1% annualised), following stagnation in Q3.

Taking a longer-term view, and looking at corporate profits as a proportion of GDP, it’s worth noting that for the fifth quarter in a row they have been well above their long-term average.

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