United States Second Quarter Profits Up 8%, GDP Up 4.2%

United States Second Quarter Profits Up 8%, GDP Up 4.2%

The United States second quarter corporate profits zoomed up 8%, and the national gross domestic product gained 4.2%, according to a revised release by the Commerce Department. Despite Europe’s perpetual recession, Asia’s stumbling, and South America’s defaults, the United States economy is partying like it’s 1999 again.  

Corporate profit growth in the quarter ending June was the best in almost four years and followed a 9.4% drop in the quarter ending March. The domestic economy led the way, as non-financial firms reporting a +10.6% gain versus a -7.4% decline, and financial firms reported a +7.3% gain after a -17.1% decline in the prior quarter. Corporate profits outside the U.S. rose by only +1.2% after falling by 6.1% in the prior quarter. For the last 12 months, U.S. corporate profits are still down -.3%.

Gross domestic income rose faster than GDP with a +4.7% gain, reflecting consistent employment and wage gains. That strong hiring trend continued last week, according to a separate Labor Department report, as the number of Americans filing new applications for jobless benefits fell by 1,000 to a seasonally adjusted 298,000 last week. Such a low level of unemployment claims means that companies are growing headcount.

Businesses inventory accumulation was revised down to $83.9 billion in the second quarter from an earlier estimate of $93.4 billion. That actually shrank the reported GDP by .27%, but it means sales were so strong in the 2nd quarter that manufacturers had to increase production in the 3rd quarter to restock shelves.

The only negative in the report were lower housing and shrinking government spending. But this was more than offset by a revised upward +10.1% increase in exports for the quarter, coupled with strong business capital investment in equipment, new plant construction, and booming oil and gas drilling.

With the rest of the world in the economic doldrums, the American economy is booming like 1999. The U.S. stock market is at all-time, and almost every week, there is some new Silicon Valley billion dollar IPO or multi-billion dollar buy-out. Once again, corporate profits are up, employment is surging, and the U.S. dollar is the strongest currency on earth.

Chriss Street suggests that if you are interested in why the U.S. economy is beginning to boom as the Federal Reserve abandons its failed stimulus,
please click on
Oil Prices Melt as Fed’s QE Shrinks.