• By The Financial District

U.S. Corporate Profits Zoom In 2nd Quarter; GDP Rises

US corporate profits surged to a fresh record high in the second quarter, boosted by robust demand and higher prices, suggesting that an anticipated slowdown in economic growth this quarter because of soaring COVID-19 cases could be temporary, Lucia Mutikani reported for Reuters.

Photo Insert: Latest figures show that the US economy has made a significant comeback after a catastrophic 2020.

The jump in profits reported by the Commerce Department on Thursday was despite businesses facing increased costs owing to shortages of raw materials and labor. The resurgence in infections driven by the Delta variant of the coronavirus is chipping away demand for services like air travel and cruises, leading economists to cut their third-quarter growth estimates.

Profits from current production increased by $234.5 billion, or at a 9.2% quarterly rate, to a record $2.8 trillion, after rising at a 5.1% pace in the first quarter. They were driven by a $169.8 billion surge in profits at domestic nonfinancial corporations.

There were also gains in domestic financial corporations' profits as well as rest-of-the-world profits. Pre-tax profits as a share of GDP, a proxy for economy-wide profit margins, rose 0.7 percentage points to 12.3%, their highest since 2014.

National after-tax profits without inventory valuation and capital consumption adjustments, conceptually most similar to S&P 500 profits, increased $303.6 billion, or at a 12.8% pace, up from the 9.4% pace notched in the January-March period.

All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

Profits were up 69.3% from a year ago, partially exaggerated by low base comparisons in the second quarter of 2020 following mandatory shutdowns of non-essential businesses.

Gross domestic product increased at a 6.6% annualized rate, the government said on Thursday in its second estimate of GDP growth for the April-June period. That was revised up from the 6.5% pace of expansion reported in July.


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