US: Domestic profits squeezed by low inflation - BNPP

Paul Mortimer-Lee, Chief Market Economist at BNP Paribas, explains that the US latest national income (NIPA) tables show profits being squeezed, which is much at odds with a strong quarter for S&P reported profits.

Key Quotes

“We explain the differences. 

• The NIPA tables are the ones to look at from an economic perspective. We suspect there may be some profit shifting abroad, anticipating a reduced repatriation rate.
• Profits from abroad are up 25% in the last year, while domestic profits fell 6%. Weak pricing power, stable inflation expectations and rising wage costs are the cause.
• A less strong USD may allow some recovery of prices and profits in the immediate period ahead, but if wage costs and the greenback both rise, watch out.”