Corporate profits grew last quarter. The data were released along with the less interesting upward revision of GDP. Here’s the picture:
Dividend payments are more stable than profits; they did not rise nearly as much, meaning that retained earnings were up nicely. That bodes very well for capital spending. Ability to pay is not the entire story in demand for equipment, but it plays a significant role. The slower growth rate of GDP has not been enough slower to really ease capacity pressures in many sectors, so the outlook for capital spending continues to be positive.
Business Strategy Implications: Today’s news reinforces our optimism expressed yesterday about the outlook for capital spending.
Other blogs posting on this subject: Stefan Karlsson has a more detailed discussion of the information.