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Last week, corporate profitability was added to the third revision of third quarter GDP growth and not surprisingly, corporate profits were up more than 28% from the same point one year ago. Up to this point little of that money has benefitted the overall economy; however, that trend may be changing.
Corporate profits reached their highest point on record during the most recent quarter, at an annualized rate of $1.6 trillion. From a historical perspective, corporate profits as a percent of GDP are still slightly above the long-term averages.
Over the last several years, companies hoarded cash, at the expense of hiring and expansion. However, in recent quarters, nonfinancial corporations are showing signs of reducing liquid assets and cash in favor of capital expenditures and hopefully, hiring.