Thursday, August 30, 2007

Energizer Bunny Economy

The Commerce Department reported today that corporate profits strengthened in the second quarter, and hit an all-time high of $1.646 trillion on a before tax basis and $1.154 trillion after taxes (see chart above). Profits after taxes grew by 5.4% in the second quarter, after rising by 1.5% in the first quarter. Year over year, corporate profits increased by 3.5%.

During the last five years, corporate profits in the expanding U.S. economy doubled from $829 billion in 2002 to $1646 billion ($1.646 trillion) in 2007. Another way to think about it is to say that it took 220 years, from 1776 to 1996, before the U.S. economy was able to go from close to zero corporate profits to being able to generate $800 billion of corporate profits (not adjusted for inflation) in a year, and it then took only a 5 year period (2002-2007) for the U.S. economy's corporate profits to double from $800 billion to $1600 billion. Not bad for a "Rodney Dangerfield economy" that gets no respect from the media.

Another way to put U.S. corporate profits of $1.646 trillion in perspective is to compare it to world GDP figures. If the $1.646 trillion of profits generated by American businesses were considered to be a "country," the corporate sector of America would be the
8th largest country in the world, just slightly behind Italy, and larger than the entire economies of Canada, Spain, Brazil, Russia, and about twice the size of the entire economies of S. Korea, Mexico, India and Australia!

There has certainly been a lot of volatility in stock prices, but corporate profits in the "Energizer Bunny economy" are rising steadily and consistently, and have reached all-time historical highs in each of the last 6 years! Like the Energizer Bunny, corporate profits in the U.S. economy just keep going and going and going. UP.

2 Comments:

At 9/03/2007 12:21 PM, Blogger Adventures In Money Making said...

but doesn't everything that goes up, have to come down at some point?

 
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