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More on corporate profits

This extends my posts of yesterday on the subject of corporate profits. This chart shows total corporate profits alongside profits from nonfinancial business corporations. Note that the two vertical scales are proportionately calibrated, with nonfinancial domestic profits just about half of total profits. The chart should make it clear that financial sector profits (and losses) have not greatly distorted the total profits picture on balance.

It's interesting to note the huge decline in nonfinancial domestic profits in the wake of the relatively mild 2001 recession, and the far milder drop in those profits during the much more severe 2008-09 recession. I don't have a good explanation for that, but would welcome suggestions.

The above chart compares NIPA profits (total after-tax economic profits of U.S. corporations) with reported operating profits of major corporations. Note how much more stable NIPA profits are than operating profits. I also detect a tendency for NIPA profits to lead operating profits. One reason for that, of course, is that the operating profits ratio is based on trailing four-quarter profits, whereas NIPA profits represent a seasonally-adjusted annual rate for each quarter. We could see some pretty impressive performance in this series over the next year as operating profits catch up to the stronger NIPA profits.

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