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Global corporate profits to fall 8% in Q3 after record Q2 - data

Global corporate profits in the third quarter are likely to fall for the first time in 18 months after record earnings in April-June, Reuters calculations showed, as the spreading COVID-19 Delta variant squeezes supply chains and raises labour costs.

Massive fiscal stimulus to support economic recovery and loosened pandemic curbs generated high consumer demand in the second quarter, and companies contending with disrupted supplies and falling inventories raised prices to offset James Solloway, chief market strategist at SEI, said a further fall in interest rates could squeeze U.S. banks’ profitability rising input costs.

This helped boost the combined net profits of 2,542 global companies with market capitalisation of at least $1 billion to a record $734 billion in the quarter ended June, according to a Reuters analysis of Refinitiv data.

But profits are estimated to fall 8% on average to $678.2 billion in the July-September quarter.

China’s factory output and retail sales growth contracted sharply in July, as new COVID-19 outbreaks and floods disrupted business operations, while U.S. business activity growth slowed for a third straight month in August.

Also, a months-long shortage of semiconductor chips that forced automakers to slash production and smartphone makers to save chips for popular models is turning into a fresh crisis as COVID-19 cases surge in Asian countries here that are key to global supply chains.

Reference: Reuters