The closing scissors and profits

Michael Roberts Blog

Global corporate profits growth is heading south, according to analysis by JP Morgan economists. JP Morgan estimates that, after surging a humungous 89% (4q moving ave) in 2021, global corporate profits moderated to a still-solid 24% in the year ending in 2Q22. And they reckon that “on net, the level of profits is 17% above its pre-pandemic trend, but still making up for lost earnings through the pandemic.” However, JP Morgan expects “slowing in profit growth in the coming quarters as inflation cools while labor markets remain tight. Additional pressure is coming from rising corporate borrowing rates as central banks press on with the steepest tightening cycle in decades.” The scissors of a future slump (falling profits and rising interest rates) are beginning to close.

During the post-pandemic recovery, corporate profit margins (that’s the difference between revenues and costs per unit of production) reached multi-decade highs as the surge in…

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