U.S. corporate profits probably fell for 6th straight quarter, survey predicts

Posted Dec 29th 2008 1:02PM by Joseph Lazzaro
Filed under: Forecasts, Housing, Recession

Those investors looking for the first signs of an upturn in the U.S. economy most likely won't find it in corporate earnings for the current quarter.

U.S. corporate profits in Q4 probably fell for the sixth straight quarter amid falling consumer spending for homes, cars and retail items, a new Bloomberg News survey indicated.

Fourth-quarter earnings from S&P 500 companies probably fell an average of 11.9% from a year ago, according to data compiled by Bloomberg News. If quarterly earnings decline in Q4, it would be the longest slump since 1988. Analysts surveyed also predicted that the streak would reach eight quarters, with a 10.3% earnings decline in Q1 2009 and a 5.8% decline in Q2 2009.

Economist Richard Felson said economists are hoping that the earnings downturn is merely cyclical in nature.

"There's real concern that what we're seeing now is not just a economic cyclical trough, but a structural change in consumer buying patterns, driven by stagnant real incomes, the end of a period of excessive debt and borrowing, and by demographics," Felson said. "If the above proves to be true, we're looking at a different GDP growth model for the United States and a challenging earnings environment, even after the economy starts to recover."

One key to the recovery's earnings environment, in Felson's view? The shape of the housing sector.

"Housing remains a major unknown and a major factor in future earnings growth because it drives a considerable portion of retail sales. People don't just buy a home, they also buy things that go in the house when they buy the home," Felson said. "For that reason, if we don't see an upward pop in home sales, we won't see it in retail either, which will hurt earnings growth." The housing market has been in recession for about three years, with the median price for an existing home declining to $181,300 from $208,800 a year ago, according to the National Association of Realtors.

Further, if one projects a housing market recovery in three quarters -- possible but not probable, Felson said -- corporate profits would begin to recover in Q4 2009 or Q1 2010.

Earnings Analysis: The slightly stronger dollar is also hurting corporate earnings. During the recent economic expansion, corporations selling goods overseas could count on a weak dollar to provide a tailwind by reducing the price of their goods; that's less of a factor today, given the dollar's modest rise.

Tags: corporate earnings, earnings, economy, featured, gdp, housing, retail sales, U.S. economy

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Reader Comments (Page 1 of 1)

12-29-2008 @ 2:54PM

Bill said...

Profits may suffer, but the CEOs will continue to earn obscene "financial packages" while the employees lose their jobs and health care.

12-29-2008 @ 4:41PM

danzillo said...

they keep allowing the jobs togo to china so they dont have to pay benefits..so guck em..deep..

12-29-2008 @ 4:52PM

Jeff said...

Blame the CEO's, Blame Bush or whoever....the real crooks are in Congress, and you can bet they'll vote themselves a raise.

12-29-2008 @ 5:35PM

justpicky said...

bill ....you're right . Over 10 million people laid off for the last several months , if Big 3 doesn't get help add another 7 million , then let's not forget the other companies add another 10 million soon there will be between 30 - 40 million people out of a job .
CEO'S are the cause for this , GOLDEN PARACHUTES , not the employees . know companies pay less money per hour , how are you going to survive making $13.00 an hour ? I DON'T SEE IT . They say , people make to much with Big 3 , but that's only 10% , that's alot considering CEO'S paychecks and bonuses over billion dollars . they mismanage there accts , know let them sell there assets , and anything else they own , and give back to the employees .... ONLY ONES SHOULD BE HELPED IS THE "MIDDLE CLASS " THEY'RE THE HARD WORKERS , who deserves good wages , since they work harder .............

12-29-2008 @ 10:00PM

Companies in USA are TRAITORS said...

United States are being sold out by TRAITORS ...COMPANIES ....they're the one who's stealing your job , if you aren't laid off by now , you soon will be .

NAFTA WAS A HUGE MISTAKE ,clinton is the blame for that too .

EACH PAST / PRESENT PRESIDENT ARE THE BLAME FOR MANY THINGS .....

OBAMA , HE WILL BE WATCHED CAREFULLY........ MILLIONS OF PEOPLE , HAS THERE "EYES "ON HIM ....

help the middle class , they're the ones who deserves it .

12-29-2008 @ 5:47PM

SLEEKKAT said...

just get rid of the top 10 in all the banks and big corps. no severance pay, no golder parachutes, just kick them out the door. the money saved would be amazing. so many people could return to work. cut vacations back down to 2 paid weeks a year, use the money to help pay for health ins. people have got to start cutting back somewhere or those soup lines are going to get longer and longer and have you ever tasted that soup? i have and its basically flavored water. i pray i never have to do that again.

12-29-2008 @ 10:23PM

George said...

HERE'S THE TRUTH, FOLKS...The consequences of spending $5-7 A DAY more than we earn(look at the $50-70billion a month trade deficit), for every man woman and child in the country(that's 300 million), for the last ten years, are becoming evident.........What's interesting is that the new man at the helm is proposing we spend even more than we earn(did I hear a $800billion rescue package?). Isn't that rather like having a drink or two to cure last night's hangover? We would still be alcoholics. The only logical answer(except one) is that we have to accept a lower standard of living...Not by much, but we cannot continue to spend more than we earn.....There is one other solution, produce and sell more, but is that likely? ? XMAS IS OVER FOLKS!