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US Corporate Profits at All-Time High as GDP Growth Holds at 2.5 Percent

The Bureau of Economic Analysis released new data today showing that corporate profits reached an all-time nominal high in the second quarter of 2013. Profits before tax rose to 12.53 percent of GDP from 12.22 percent in the previous quarter, as the following chart shows. That was just fractionally short of the all-time high of 12.60 percent reached in the final quarter of 2011. At the same time, the BEA confirmed that GDP grew by 2.5 percent, the same as the August estimate.

Meanwhile, proprietors’ income was flat in Q2. Popular discussions often treat proprietors’ income as a proxy for the income of small business. It includes the current income of unincorporated businesses that have the legal forms of proprietorships, partnerships, and tax-exempt cooperatives. It does not perfectly match up with small firm size because some small firms are incorporated and some proprietorships, partnerships, and cooperatives are large.

Proprietors’ income has lagged behind corporate income in recent decades. In the 1950s and 1960s, the shares of corporate profits and proprietors’ income were roughly the same. Now, corporate profits are half-again greater. The gap between the two hit an all-time high in Q4 2011, when corporate profits reached 168 percent of proprietors’ income. (This earlier post discussed some of the reasons for the increasing disparity between large and small-business profits, including changes over the years in tax and healthcare policy.)

The report on GDP and its components contained few surprises. Compared with August’s second estimate, today’s third estimate shows the same overall rate of growth of real GDP, at 2.5 percent. Inventory accumulation and the growth of exports were slightly less rapid than previously estimated. Those changes were offset by slightly faster growth of consumer spending and a slightly less rapid decrease in the government’s contribution to GDP.

 

 

 

 

2 Responses to “US Corporate Profits at All-Time High as GDP Growth Holds at 2.5 Percent”

WJHalversonSeptember 27th, 2013 at 8:59 am

Curous how these figures compare back into the 1870s when industrial capitalism was founded in teh USA. I reall reading that a reason why national corporations were set up was to decrease labor power and increase the ability of 'proprietors' to make profit.

xyzxyzxyzxyzxyzSeptember 29th, 2013 at 1:12 pm

What % of this is because of the low interest rates that allow companies to issue debt for next to no costs?

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