November 30, 2006 – According to yesterday’s data release, U.S. corporate profits from current production rose by 4.2% in Q3 (not an annual rate) after 1.4% growth in Q2 (Charts 1 and 2).
Compared to the same quarter last year, real corporate profits from current production rose by 27.2% in Q3 (Chart 3). However, this strength in year-ago profit growth is somewhat misleading, because corporate profits were temporarily depressed by Hurricane Katrina in Q3 last year.
According to the BEA, Hurricane Katrina reduced nominal profits by about $165B in Q3 last year. Without this Hurricane-Katrina effect, real profits would have risen by about 12.5% in Q3, compared to the year-ago quarter. That’s not as spectacular as the actual increase, but it does qualify as very good profit growth.