US Corporate Profit Margins Are Coming Back Down To Earth

Today wasn’t the best day for US economic releases. The 2nd revision of 1Q GDP was (unsurprisingly) revised down from 0.2% to -0.7%. The release that caught our eye, however, was the initial release of corporate profits in the US for the first quarter. After-tax corporate profits did rise by 2.7% year-over-year in the first quarter but this was on the heels of the 2014 4Q revision that reduced the growth rate of corporate profits from +2.9% to -2.5% during that quarter. Corporate profit margins have now dropped below 8% for the first time since 2009. Margins, as measured by after-tax profits divided by nominal GDP, hit an all-time record of 10.06% in 4Q2011. Margins have since steadily fallen to the its current level of 7.97%.