Corporate Tax Receipts Forecast An Awesome End To 2010

And the latest data point to invalidate double dip fears is… corporate tax receipts.

Slowing, but still up strong year-over-year, they’re enough for Deutsche’s chief economist to throw cold water on double-dip recession fears:

Deutsche Bank’s Joseph LaVorgna:

Corporate income tax receipts fell precipitously as economic activity faltered ahead of the last recession. Just before the recession ended in June 2009, tax receipts began to post a sharp recovery which has extended into the current quarter. This recovery presaged a swift acceleration in business spending on equipment and software. In Q2, corporate tax receipts rose 37% from the year earlier period, and capex was up 16% y/y. Our tracking estimate of receipts shows a modest slowdown in the current quarter—which we estimate at 33% y/y—but we do not think this contradicts our capex forecast, which anticipates a slowdown from a 25% q/q AR in Q2 to roughly 5% in the current quarter. Business investment spending is slowing, but we do not project an outright contraction since corporations have ample cash and the capital stock is deteriorating faster than it is being replaced (leading to an outright contraction in industrial capacity).

Business are still expanding, and given where the economy has been, continued growth, even if not spectacular, will make for an awesome end to 2010.


(Via Deutsche Bank, Corporate tax receipts suggest businesses still expanding, Joseph LaVorgna, 27 September 2010)

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.