Corporate profits

Corporate profits fall the most in the first quarter since the Great Recession of 2008

Numbers: US corporate profits fell 13.9% in the first quarter, the Commerce Department said Thursday. This is the largest drop since the fourth quarter of 2008 during the Great Recession. The decrease is not annualized. Profits were $ 1.84 trillion annualized in the first quarter, up from $ 2.13 trillion in the last three months of 2019.

What happened: Domestic profits fell 14.9% in the first quarter, overseas profits fell 10.8%. Over the past year, corporate profits have fallen 8.5%.

Big picture: The drop shows how the coronavirus pandemic and the resulting business closures have hurt the economy. Businesses have experienced a sharp decline in revenues and their costs have increased at the same time. The Beige Book report released on Wednesday showed that most companies remained pessimistic about the outlook.

What are they saying? “If companies are concerned about profits, they may not be willing to invest in the future and this will hamper growth in the short and long term, ”said Gus Faucher, chief economist at PNC Financial Services Group. The key question is whether companies expect demand to return. If so, the drop in profits could be a temporary incident, he added.

Market reaction: Shares were higher on Thursday as traders continued to focus on steadily opening the US economy. The S&P 500 SPX index,
was up 15.3 points late in the morning.