Corporate Profits Were the Highest on Record Last Quarter
The nation’s workers may be struggling, but American companies just had their best quarter ever.
American businesses earned profits at an annual rate of $1.66 trillion in the third quarter, according to a Commerce Department report released
Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or non-inflation-adjusted
Corporate profits have been going gangbusters for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven
consecutive quarters, at some of the fastest rates in history.
This breakneck pace can be partly attributed to strong productivity growth — which means companies have been able to make more with less — as well
as the fact that some of the profits of American companies come from abroad. Economic conditions in the United States may still be sluggish, but many
emerging markets like India and China are expanding rapidly.
Tuesday’s Commerce Department report also showed that the nation’s output grew at a slightly faster pace than originally estimated last quarter.
Its growth rate, of 2.5 percent a year in inflation-adjusted terms, is higher than the initial estimate of 2 percent. The economy grew at 1.7 percent
annual rate in the second quarter.
Still, most economists say the current growth rate is far too slow to recover the considerable ground lost during the recession.
“The economy is not growing fast enough to reduce significantly the unemployment rate or to prevent a slide into deflation,” Paul Dales, a United
States economist for Capital Economics, wrote in a note to clients. “This is unlikely to change in 2011 or 2012.”
The increase in output in the third quarter was driven primarily by stronger consumer spending. Wages and salaries also rose in the third quarter,
which might help bolster holiday spending in the final months of 2010.
Private inventory investment, nonresidential fixed investment, exports and federal government also contributed to higher output. These sources of
growth were partially offset by a rise in imports, which are subtracted from the total output numbers the government calculates, and a decline in
housing and other residential fixed investments.
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edit on 23-11-2010 by camaro68ss because: (no reason given)