Let’s Discuss Actual Corporate Profits, Heading Into Earnings Season

Corporate profits are a crucial indicator of economic performance and financial health for U.S. corporations. These profits contribute to retained earnings and funding for capital investments. The Bureau of Economic Analysis prepares estimates of corporate profits as part of the national income and product accounts. In the first quarter, profits from current production decreased, including a decline in profits for domestic financial and nonfinancial corporations. Real and nominal profits have experienced a significant decline, comparable to the lead-up to the Great Recession. There have been instances of consecutive quarters of declining corporate profits, both within and outside of recessions. The debate between GDP and GDI (Gross Domestic Income) is relevant, with corporate profits favoring the GDI perspective. Caution is advised when interpreting reported earnings, as corporations may employ various strategies in reporting to the public versus the IRS.