Corporate Profits: Why The US Is Not In Recession

Includes: DIA, QQQ, SPY
by: Hale Stewart

by New Deal democrat

The other day I wrote that the current slowdown does not meet the definition of a recession. It is not a broad downturn in production, sales, income, and employment, but rather an intensely focused downturn in production and sales in the commodity and export sectors, that has not spread to other manufacturing sectors, and not to consumers at all.

I neglected to include a brief discussion of corporate profits. There is no doubt that corporate profits, in the aggregate, have declined over the last year. But it turns out that same division between energy sectors and everything else also applies.

Here is a graph from Recession Alert, comparing S&P 500 profits as a whole vs. the S&P ex-energy, with 74% of all companies having reported for the 4th Quarter of 2015:

Ex-energy, S&P corporate profits improved through the 3rd quarter, with only a slight decline in the 4th quarter.

Another similar comparison comes from Bloomberg, which compares profits overall with profits of consumer stocks:

Profits in consumer sector have continued to increase.

So corporate profits support the conclusion that this is an intense but narrowly focused downturn.