Big Jump in Profits

The Lehmann Letter (SM)

  

This morning’s GDP report included good news on profits.

After-tax corporate profits surged to $1,669.3 billion in this year’s first quarter, rising substantially from last quarter’s $1,493.9 billion. Look at the chart to put it in perspective. The new reading is off the top of the chart, breaking away from an earlier plateau of around $1,400.0 billion.

That’s bullish for the stock market and, we hope, an omen of future good news. This letter has been skeptical: Seeing a top in profit margins and leery of future sales-volume gains. Perhaps that skepticism was unwarranted.   

Profits

(Click on chart to enlarge)

(Recessions shaded)

Meanwhile, the remainder of the GDP report was ho-hum:

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

GDP grew by only 1.9% in the first quarter, down slightly from last month’s preliminary report of a 2.2% gain. Government spending remained a drag as it contracted. That’s too bad, because it could be growing absent concerns about deficits. Consumption and business capital expenditures continued to improve.

But – once again – the profits report was good. Let’s hope it was an omen of future good tidings.

(To be fully informed visit http://www.beyourowneconomist.com/)

© 2012 Michael B. Lehmann