forthcoming>>

CORPORATE PROFITS GROWTH

In addition to their regular forecasts, country panellists were asked to provide estimates of the growth of corporate profits in their respective economies between now and 2019. As is our usual practice, the data is measured as the average percentage change over the previous calendar year. Not surprisingly, the individual profits definitions differ according to local custom and data availability. However, following discussions with forecasters from our country panels, the definitions outlined below were considered as the most widely accepted economic measures of corporate profitability. The resulting consensus forecasts represent mean averages of the panellists' forecasts. Readers should note that the groups of survey respondents may be smaller than those listed on our main country forecast tables.

Our surveys for Corporate Profits cover each of the countries listed below, and are conducted twice a year in May and November. The table and text commentary below represents a portion only of this special survey taken from our November 2014 issue of Consensus Forecasts. To view a sample issue of Consensus Forecasts please click the "Download Sample Issues" button below.

Consensus Forecasts
United States Italy
Japan Canada
Germany Norway
France Spain
United Kingdom Sweden

Download Sample Issues



Corporate Profits by Country
 
Historical Data
Consensus Forecasts
* % change over previous year 2011 2012 2013 2014 2015 2016 2017 2018 2019
 United States
4.0
11.4
4.2
0.5
7.2
3.6
2.6
2.9
3.2
 Japan
-6.0
8.8
19.7
5.0
4.0
5.1
3.6
4.0
1.7
 Germany
5.7
-3.3
0.9
2.2
2.3
4.0
3.5
3.0
3.2
 United Kingdom
7.1
3.4
5.0
6.1
4.6
2.2
3.4
4.4
5.2
 Canada
15.4
-4.2
-0.6
8.7
5.1
5.0
5.9
5.3
4.3
 Spain
1.7
1.1
0.1
0.9
3.7
4.0
5.0
5.3
5.5

Definitions (all in nominal terms and all on a national accounts basis except Japan and Norway)

United States:- Pre-tax Corporate Profits with capital consumption and inventory valuation adjustment, i.e. after allowance for depreciation and for the impact of inflation on inventories.

Japan:- Pre-tax Corporate Recurring Profits with capital consumption and inventory valuation adjustment, all industries excluding financial and insurance.

Germany:- Gross Entrepreneurial and Property Income, excludes all wage and salary income but includes that from interest and dividends.

United Kingdom:- Private Non-Financial Corporate Trading Profits, i.e. income (excluding North sea oil and gas activities) before tax, excluding all income of overseas subsidiaries and before allowance for capital depreciation but net of stock appreciation.

Canada:- Pre-tax Corporate Profits, excluding interest and investment income and before allowance for either the impact of inflation on inventories or capital depreciation.

Spain:- Gross Corporate Profits (whole economy), before interest and taxation.

Peaks and troughs in corporate profitability tend to precede those of the business cycle, with profit growth rates often peaking early in an economic expansion and then easing again before the downswing is fully underway. This leading cyclical pattern is represented in the chart (right) which shows recent corporate profits growth and forecasts for the United States, Germany, the United Kingdom (excluding North Sea oil and gas revenues) and Canada, with all five traversing somewhat similar paths over the next 5 years. The US, German, French, UK, Canadian and Spanish series, as measured by the national accounts, are each based on a large sample of firms and are broadly comparable.

We also present, at the bottom of this page, quarterly forecasts for corporate profitability in the United States through Q2 2016. These are shown in current US dollars and in terms of annualized, quarter-on-quarter and year-on-year percentage changes. 2014 began on a particularly weak note for US corporate profits (defined in the national accounts as pre-tax corporate profits with inventory valuation and capital consumption adjustments). A one-off surge in healthcare costs – coupled with freezing weather which shut down production and interrupted supply chains – prompted profits to collapse by 32.6% in q-o-q annualized terms. Q2 earnings saw a strong rebound, with profits recovering by 38.3%. Our US panellists, not surprisingly, do not expect this robust trend to continue, although profits growth in the three months to September is still projected to advance by a not-insignificant 11.7%. The y-o-y pace shows a differing pattern. After a sharp drop at the beginning of 2014, profitability is expected to recover only moderately for the rest of this year. The outsize Q1 2015 outturn will be a base-year distortion before profits growth averages a more realistic 4.7% (y-o-y) pace over the rest of the forecast horizon. Despite robust stock market gains this year, especially among the S&P500, an increasingly uncertain and volatile global environment – along with plunging emerging market currencies and the Federal Reserve's phasing out of quantitative easing (QE) in October – have put a dampener on the US earnings outlook. By contrast, the Bank of Japan's expansion of monetary easing measures at the end of October (ironically, a day after the Fed formally ended its own QE program) has put further downward pressure on the yen. This, in turn, is helping to brighten Japan's competitive terms-of-trade – despite the fact that global demand is looking shaky. The profits cycle through to 2016 is expected to look relatively robust, despite another possible consumption-tax hike earmarked for October 2015. However, the Bank of Japan's weak-yen policy – while helping to boost imported inflation in the domestic economy – has been tarred with exporting deflation elsewhere. Indeed, economic stagnation and falling prices in Europe is of particular concern to policymakers there, with the recent tumble in commodity prices not helping matters (even though lower energy costs will be a boon to both industry and consumers alike). The French and German profits cycles look rather muted over the forecast horizon, although massive cost-cutting may help to lift Spanish profitability in the medium-term. Canada's commodity sectors will very likely suffer from the price-related drop in revenues, although a recovering US economy and relatively solid fundamentals at home have helped boost this year's profits forecast to 8.7%.

A portion of the text from Consensus Forecasts, November 10, 2014.