Corporate Profits Bounced In Q2

This morning’s
revised Q2 GDP reportalso came with a preliminary estimate of Q2 corporate profits.

Profits climbed 3.9% quarter-over-quarter, after having gone negative in Q1.

“Second-quarter corporate profits rebounded by 3.9% q/q (unannualised), after falling by 1.3% in the first,” said Capital Economics’ Paul Ashworth. “Nevertheless, a big jump in dividend payments meant that net cash flow actually fell, which is not an encouraging sign for the investment outlook.”

From the Bureau of Economic Analysis (BEA):

Profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) increased $US78.3 billion in the second quarter, in contrast to a decrease of $US26.6 billion in the first. Taxes on corporate income increased $US10.5 billion, in contrast to a decrease of $US25.0 billion. Profits after tax with IVA and CCAdj increased $US67.9 billion, in contrast to a decrease of $US1.7 billion.

Dividends increased $US273.8 billion in the second quarter, in contrast to a decrease of $US103.8 billion in the first. The large second-quarter increase primarily reflected dividends paid by Fannie Mae to the federal government. Undistributed profits decreased $US205.9 billion, in contrast to an increase of $US102.1 billion. Net cash flow with IVA — the internal funds available to corporations for investment — decreased $US194.6 billion, in contrast to an increase of $US140.7 billion.

Corporate profits by industry

Domestic profits of financial corporations increased $US14.3 billion in the second quarter, in contrast to a decrease of $US4.1 billion in the first. Domestic profits of nonfinancial corporations increased $US50.4 billion, in contrast to a decrease of $US3.1 billion.

The rest-of-the-world component of profits increased $US13.6 billion in the second quarter, in contrast to a decrease of $US19.6 billion in the first. This measure is calculated as the difference between receipts from rest of the world and payments to rest of the world.

Here’s a breakdown via the BEA:

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