Corporate Profits Were Flat Last Quarter
Wall Street Analysts are scrambling to revise this quarter’s Corporate Profit projections, as the Bureau of Economic Analysis (the Government’s chief economic data keeper) announced that Profits were unchanged last quarter. This was a complete surprise, as most analysts thought US Corporations would increase their profits by 3% in Q3 2024.
Not so, said the BEA. Corporations are beginning to really struggle as profits essentially disappear. The hardest hit were the financial companies themselves, home to those Wall Street Analysts. After earning $42.5 billion in Q2 2024, fin profits fell to a negative $2.6 billion in Q3. That’s a swing of over $45 billion and one of the most significant declines we’ve seen in quite some time.
Non-financial companies’ profits increased by $30.8 billion, which is a solid accomplishment, but it was still only about a third of the increase they had the quarter before.
Finally, what the BEA calls the rest of the world (all specialty companies that don’t fit into the Financial or Non-financial category) saw their profits decline by another $38.8 billion, on top of an $18.8 billion decline the quarter before.
All in all, this was not a positive report for investors. Corporate Profits include all corporations in the nation and are, therefore, a broader group than Corporate Earnings, which include profits for publicly traded companies. Nonetheless, this shows that the business environment has turned decidedly sour over the last quarter.
Investor beware.
Overall, this second estimate of the nation’s GDP was estimated to have increased by 2.8%, driven principally by the $175.9 billion increase in personal income. Although this was slightly lower than the BEA’s first estimate for the quarter (the first estimate was a 3% increase), today’s report shows that salaries and wages continue to drive the economy.
In other news, this morning, there was a worrisome development in Durable Goods Orders, those major capital investments; the Street was looking for a 0.2% increase in Durable Goods (and some estimates were as high as a 0.6% increase). However, actual Durable Goods Orders came in at a very tepid 0.1% increase. A deeper dive revealed that Defense Spending was the chief drag on Durable Goods. Isn’t that interesting? I thought that Senator Lindsay Graham and others said that all these wars we’re involved in were supposed to be good for the economy, but apparently not in Q3.
Finally, PCE Prices, the Fed’s favorite measure of Inflation, came in at just 1.5%, down from 2.5% the quarter before. Perhaps the nation’s central banker’s interest rate cuts weren’t as harmful as some supposed.
Have a wonderful Thanksgiving!