The most recent edition of Societe Generale’s investment newsletter Global Strategy Weekly is titled “Smoke and mirrors stop us seeing a slump in US profits.” In the report, Societe Generale lead analyst Albert Edwards highlights that the recent slump in economic profits in the U.S. could be auguring the end of the current economic cycle.

Edwards explains his perspective in the overview of the report. “During the excitement of the downward revision of Q1 US GDP from +0.1% to -1.0% investors seem not to have noticed a $213bn, 10% annualized slump in the profits from current production…or economic profits. We show below the stark difference between the BEA’s calculation for post-tax headline profits (up 5.3% yoy) and economic profits (down 6.8% yoy). In this note we try to explain what is happening and why the 10% annual slump in economic profits really does matter.”

Headline profits artificially inflated


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