Monday, September 20, 2010

Corporate Profit Trends

The above graph shows corporate profits on domestic activity as a fraction of GDP, broken out into manufacturing, financial, and everything else.  The data is quarterly and seasonally adjusted, from 1948 to 2010 Q1, and comes from BEA tables 6.16B-6.16D.

The long slide in manufacturing profits is the most dominant feature of the graph.  Presumably there is complex causality here - manufacturing declined in the United States - in relative terms - because it wasn't sufficiently profitable, and as less of the world's manufacturing has been done here, its contribution to bulk profits has declined.

Also notable is the long rise in financial profits as a fraction of the economy, together with the abrupt drop in the same in the great recession, since partially restored (although the NYT this morning, suggests Q3 is not looking too bright).

Overall, domestic corporate profits have not been trending up since the second world war.  Here is the same data as individual lines:

You can see that "Other" is roughly flat, and the bulk trend is made up of the rise in financial profits failing to fully offset the loss of domestic manufacturing profits.

Tomorrow I'll add the foreign profits into the picture.

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