April 11, 2007 – In data released late last month, U.S. corporate profits from current production edged down by 0.3% in Q4 (not an annual rate) after a 3.9% gain in Q3 (Charts 1 and 2).
Despite this lack of Q4 growth, the broader trend in these profits remained exceptionally strong.
For all of 2006, real corporate profits from current production rose by 15.4%, measured Q4 to Q4 (Chart 3). In 2005, the comparable gain was 9.4%.
The damage caused by Hurricane Katrina reduced real profit growth by roughly 2 percentage points in 2005. A post-hurricane rebound added about 2 percentage points to 2006 profit growth. Averaging out these hurricane effects, real corporate profits from current production rose at a 12.4% average annual rate for the last two years. These profits have been trending at double digit rates since 2002.
Reflecting this long run of exceptionally strong growth, corporate profits from current production accounted for an impressive 13.8% of U.S. national income in Q4 (Chart 4). That’s a bit less than the 14.1% peak reached in Q3, but Q4’s corporate income share was the second highest in 56 years.
Bottom line: corporate profits continued on a very strong trend through Q4 last year.