Companies are earning superbly

The end of the Q1 2017 reporting season is upon us and company reports have been very upbeat. In the USA, sales by companies in the S&P 500 climbed 8% with profits outpacing them and soaring 15%. This is the strongest growth since Q3 2011. With one exception (telecom equities), profits rose in all sectors of the US economy – growth has been broad-based, despite the fact that on the year the greenback tended stronger. In Europe, too, the trend in the first quarter of the year was clearly northward: In the Stoxx 600 company sales increased 10%, with profits rocketing by almost 37%. The DAX companies booked sales rises of almost 4%, with profits running faster at 11 %.

German corporations saw sales and earnings grow, albeit at less of a speed than for the S&P 500 and Stoxx 600; this can be attributed to the minor relevance of oil-dependent equities in the composition of the index. The profits posted by these shares surged in first-quarter 2017 thanks to the baseline – the price of crude oil has been recovering steadily since February 2016.

The favourable trend for Q1 2017 should continue. The current profit disbursements, mainly driven by the improvement in the global economic forecast, the turnaround in oil industry earnings, the persistent momentum among technology companies and the banking industry recovery, will probably endure for the remainder of the year. For Europe, it looks better in the meantime than for the USA or Japan, a development that has been discernible for some months now in the surveys for the macroeconomic purchasing manager indices.

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