Corporate Profits QoQ

Corporate Profits QoQ measures before-tax income from current production for organizations treated as corporations. Its official name is Corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj), headlined as Profits from current production. The Bureau of Economic Analysis (BEA) publishes it every quarter in the National Income and Product Accounts (NIPA) for each calendar quarter.

It covers all US corporations, including private corporations and S corporations, plus deemed corporations such as Federal Reserve banks. It excludes dividends, capital gains and losses and other financial flows, stays neutral to tax law changes and adjusts for misreported income. There is no fixed target or threshold. The release reports the level in billions and the change from the preceding quarter with component contributions.

The reference period is a calendar quarter and releases stay embargoed until 8:30 Eastern time. The preliminary estimate arrives about 55 days after quarter end with the second estimate of gross domestic product (GDP). The revised estimate arrives about 85 days after quarter end with the third estimate of GDP and industry detail.

There is no advance estimate for the quarter and no preliminary estimate for the fourth quarter. Gross domestic income (GDI) and the average of real GDP and real GDI appear with each release. Annual updates cover at least 5 years with associated quarters and comprehensive updates occur about every 5 years. The preliminary vintage uses less complete source data than the revised vintage.

Three geographic pieces sum to the headline and each can push it up or down. Domestic strength can be offset by cross-border flows.

• Domestic financial corporations: profits of finance and insurance corporations inside US borders, including Federal Reserve banks.

• Domestic nonfinancial corporations: profits of makers and sellers outside finance, such as manufacturing, trade, information, utilities, transportation, construction and services.

• Rest of world: net cross-border corporate income, measured as profits received from abroad minus profits paid abroad.

The headline can fall while domestic pieces rise when a net cross-border swing outweighs domestic growth. Revisions can also move the headline and its pieces in opposite directions.

Anchor on corporate tax return tabulations, then adjust for misreporting, coverage and definitional items. The result is profits before tax (PBT), sometimes called book profits, still on historical cost.

Add the inventory valuation adjustment (IVA) to remove holding gains and losses so withdrawals reflect current cost.

Add the capital consumption adjustment (CCAdj) to convert depreciation to uniform service lives with empirical patterns and current replacement cost. The adjustment absorbs tax law effects so current production profits stay clean.

Profits from current production equal profits before tax plus IVA plus CCAdj. One published composition is 2225.2 = 2295.1 + (-47.6) + (-22.3) in billions. Values are seasonally adjusted annual rate (SAAR) in current-dollar billions.

For illustration, profits of 3030.0 in one quarter and 3080.0 in the next give a change of +50.0 in billions. The quarterly rate is about +1.65% and the annualized rate is about +6.76%. Multiply the ratio minus one by 100 for the quarterly rate and raise to the fourth power for the annualized rate.

Between annual anchors, extrapolate each of about 75 industries with Quarterly Financial Report (QFR) and shareholder data. The preliminary vintage uses a smaller sample than the revised vintage.