{"id":2766,"date":"2009-04-07T15:19:22","date_gmt":"2009-04-07T15:19:22","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2766"},"modified":"2025-03-27T15:48:48","modified_gmt":"2025-03-27T15:48:48","slug":"us-economic-profits-far-above-last-recession-low","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2766","title":{"rendered":"US &#8220;economic&#8221; profits far above last-recession low"},"content":{"rendered":"<p>US companies included in the S&amp;P 500 index recorded a large aggregate loss in the fourth quarter, reflecting financial write-downs, a fall in the value of inventories due to plunging commodity prices and other recession-related charges &ndash; see first chart.<\/p>\n<p>By contrast, the national accounts measure of &ldquo;economic&rdquo; profits was still firmly in the black in the fourth quarter. This covers all companies, excludes valuation effects and other charges, and adjusts for under- or over-depreciation in reported accounts. It is a better guide to underlying profitability.<\/p>\n<p>Fourth-quarter economic profits were down by 18% from their peak in the third quarter of 2006 but 94% above the trough reached in the last recession, in the third quarter of 2001. Companies have limited damage to profitability by acting fast to shed labour and slash other costs.<\/p>\n<p>The second chart shows inflation-adjusted economic profits together with a log-linear trend. At the 2006 peak, profits were 41% above the trend-line &ndash; the largest deviation since 1966. The subsequent plunge has closed the gap and profits should move below trend in early 2009. <\/p>\n<p>Market valuations already discount earnings gloom. As the third chart shows, a price \/ earnings ratio based on trend economic profits stood at 12.6 at the end of 2008 versus a long-run average of 13.8. The P \/ E, however, reached much lower levels in the 1970s and 1980s.<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/US-corp-profits-0409.jpg?__SQUARESPACE_CACHEVERSION=1239117893712\" alt=\"\" \/><\/span><\/span><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/US-nat-accts-EP-0409.jpg?__SQUARESPACE_CACHEVERSION=1239117916002\" alt=\"\" \/><\/span><\/span><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/US-PE-ratio-0409.jpg?__SQUARESPACE_CACHEVERSION=1239117934407\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>US companies included in the S&amp;P 500 index recorded a large aggregate loss in the fourth quarter, reflecting financial write-downs, a fall in the value of inventories due to plunging commodity prices and other recession-related charges &ndash; see first chart. By contrast, the national accounts measure of &ldquo;economic&rdquo; profits was still firmly in the black [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2766","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2766","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2766"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2766\/revisions"}],"predecessor-version":[{"id":5075,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2766\/revisions\/5075"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2766"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2766"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2766"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}