Publications on Profits

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Publications on Profits

29 June 2023

ECONOMIC BULLETIN - BOX

How have unit profits contributed to the recent strengthening of euro area domestic price pressures?

Elke Hahn

Economic Bulletin Issue 4, 2023

English

Abstract: This box looks at how unit profits have contributed to the recent strengthening of euro area domestic price pressures, using national accounts data up to the first quarter of 2023. It analyses the contribution made by unit profits using a broad profit indicator based on gross operating surplus and mixed income, as well as more narrowly defined profit indicators derived from the national accounts (which are closer to business profits). It also shows how the current signals from unit profits based on national accounts data correspond to those of indicators of mark-ups and profit margins derived from corporate accounts. This analysis shows that unit profits have grown strongly of late and made a visible contribution to domestic price pressures in the euro area. This is true for both the broad indicator of unit profits and more narrowly defined profit indicators. The box also shows that in an environment characterised by surging intermediate consumption costs, it is possible for unit profits to increase strongly and have an upward effect on inflation while mark-ups and profit margin indicators derived from corporate accounts remain broadly unchanged.
JEL Code: E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation

29 June 2023

ECONOMIC BULLETIN - BOX

Earnings calls: new evidence on corporate profits, investment and financing conditions

Economic Bulletin Issue 4, 2023

English

Abstract: This box analyses sentiment indices of profits and investment that have been compiled from a new data source, namely earnings call transcripts of listed euro area firms. It shows that these data series have correlated well with standard investment and profit series over the past two decades. It also demonstrates that profit sentiment has improved since the third quarter of 2021, while corporate investment sentiment rose slightly further in the second quarter of 2023, despite tightening financing conditions. At the sectoral level, profit sentiment in the services and utilities sectors has held up better than it has in the manufacturing sector since last year. In addition, an indicator of financial risk extracted from the earnings call data shows that firms are highly concerned about rising financing costs and perceive tighter financing conditions as a clear risk.
JEL Code: E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E30 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles

30 March 2023

THE ECB BLOG

How tit-for-tat inflation can make everyone poorer

High energy prices have dented real incomes. How to allocate these losses is at the heart of recent negotiations between firms and workers. If both sides try to unilaterally offset any real income losses, this could trigger successive wage and price increases, and create risks of an upward spiral that could make everyone poorer.

English