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CORPORATE PROFITS GROWTH

In addition to the regular forecasts which we receive each month for the G-7 countries, we also undertake special surveys of corporate profits twice a year over a 5-year horizon in our Consensus Forecasts™ publication. 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 panelists' forecasts.

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 2013 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

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Corporate Profits by Country
 
Historical Data
Consensus Forecasts
* % change over previous year 2010 2011 2012 2013 2014 2015 2016 2017 2018
 United States
25.0
7.9
7.0
3.7
4.9
5.6
6.3
4.1
5.4
 Japan
68.1
-6.0
8.8
17.0
5.4
3.1
4.6
6.6
6.7
 Germany
13.4
5.3
-1.4
3.1
5.6
3.8
4.0
3.9
3.8
 United Kingdom
4.0
5.9
4.3
5.0
5.4
4.6
5.3
4.2
3.8
 Canada
31.6
11.3
-4.9
-5.0
4.0
6.4
8.2
6.9
5.2
 Spain
-1.0
5.0
2.2
2.2
3.7
3.8
4.4
4.9
4.7

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 shows recent corporate profits growth and forecasts for the United States, Germany, France, 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 show quarterly forecasts for corporate profitability in the United States through Q2 2015. As illustrated in the box at the bottom of the page, these are shown in current US dollars and in terms of annualized, quarter-on-quarter and year-on-year percentage changes. Q2 2013 was an upbeat quarter for pre-tax profits and, with stock markets bullish and many S&P 500 companies reporting upbeat earnings for Q3, US profitability could see a better-than-expected 2013 as a whole. Still, the profits outlook is being tempered by ongoing uncertainty over the fiscal picture in Washington, with policymakers facing yet another showdown early next year. The Federal Reserve's pre-announced plans to taper the pace of quantitative easing may also have impacted on firms' investment decisions. With inflation waning and the job market on an improving bent, many observers predict that the Fed will begin to wind down ultra-loose monetary stimulus measures sooner rather than later. The financial markets have reacted skittishly to the news, in large part because this will represent a pullback in easy liquidity which has flooded the banking system over the past few years. This could translate into firms hunkering down after a decent period of earnings growth this year. The US profits cycle is expected to remain in line with other major economies. Indeed, concerns over lingering global headwinds on export prospects (and, in turn, revenues) continue to play a role in the relatively muted longer-term outlook for G-7 and European profitability. Japan's surge in corporate earnings growth this year (estimated at a massive 17.0%) stands out. Japanese export-oriented firms have benefited from yen weakness as well as fiscal and monetary stimulus. This initial momentum is expected to fade rather quickly, though, as next year's planned consumption tax increase may signal a period of fiscal consolidation ahead. In Canada, corporate profitability has languished in negative territory for a second year running, despite solid growth fundamentals and the country's strong commodity-based sectors. Not surprisingly, export demand has been on the wane; Canada is especially dependent on US fundamentals which have been shaky on the back of fiscal headwinds early in 2013. Still, Canadian earnings are set to outpace profits growth in most other countries surveyed (with the possible exception of Japan). Corporate earning patterns in Germany, France and the United Kingdom are expected to converge, likely as a result of the drawn-out European recession (which has condemned Italian profits to a third straight year of decline). Spain's severe cost-cutting measures (the dark side of profits growth) have helped earnings recover there.

A portion of the text from Consensus Forecasts, November 11, 2013.