The strong economic recovery since the pandemic started has been good for almost everyone. Nonfinancial corporations are no exception. They have been raking in high profits and using those mainly to pay dividends to their shareholders and building up their stockpiles of cash. Investments in new buildings, computers, car parks and other equipment are at reasonable levels, but not an exceptional priority for corporations.
The latest Federal Reserve data on the country’s finances show that nonfinancial corporations have been very profitable over the past few years. Their inflation adjusted profits increased by an average annualized rate of 12.1% from December 2019 to December 2023 – from $1.6 trillion to $2.5 trillion (in 2023 dollars). For the business cycle that started with the first quarter of 2020 then, before tax profits averaged 4.0% of all nonfinancial corporations’ assets, the largest ratio since the business cycle that ended in the middle of 1980. After-tax profits averaged 3.4% of total corporate assets. This was the highest average since the business cycle that ended in late 1969. Nonfinancial corporations have not been this profitable in almost half a century.
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