Profit warning


Michael Roberts Blog

The final estimate of US GDP in the fourth quarter of 2014 came out today. US real GDP growth was left unrevised at 2.2% year-on-year in the final three months of the year and the figure for the whole of 2014 was unrevised at 2.4%. Mainstream economists were keen to suggest that the current quarter in 2015 ending this week could show a pick-up.

But none mentioned the really important development – that corporate profits fell in the fourth quarter, increasing the risk of a new slump in investment in 2015-16. Profits fell $30.4 billion in the fourth quarter, in contrast to an increase of $64.5 billion in the third. This seems mainly due to a fall in profits from overseas as the dollar’s strength drove income gathered in other currencies down. This meant that corporate profits are lower by 0.2% from this time last year and are down 0.8%…

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