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Profits of US companies are collapsing: CEOs must take corrective measures!
Oliver Binz, Professor of Accounting at ESMT Berlin, analyzes the challenges and causes of profit declines in the fourth quarter.
Profits of US companies are collapsing: CEOs must take corrective measures!
In his current analyses, Oliver Binz, Associate Professor of Accounting at ESMT Berlin, takes a critical look at the economic situation at the end of the fourth quarter. As is well known, it is common practice there for companies to have to adjust their financial statements up or down. But like him in one Article from table.media As noted, US companies' profits often fall by almost 50 percent during this phase compared to previous quarters. The reasons for this lie in distorted estimates of expenses spread over the year.
What is interesting is that the markets still react negatively to the falling numbers, even though the companies' operating business remains stable. A discrepancy that can get CEOs into trouble, because incorrect numbers can lead to hasty and inefficient decisions. Ultimately, this situation means that the confidence of the capital markets suffers, as analysts and investors often cannot understand the logic behind the corrections.
The role of US labor market data
With a wage increase of 0.5 percent compared to the previous month, the labor market exceeded expectations and signals a cautious interest rate policy from the US Federal Reserve. This policy is further supported by monetary policy as Fed Chairman Jerome Powell emphasizes to the US Congress that there is no rush to cut interest rates. It is noted that premature easing of monetary policy could jeopardize progress in the fight against inflation.
Economic developments in Europe
In Switzerland there is also an increase in the unemployment rate to 3 percent, the highest rate since December 2021. Economic conditions are particularly tense in industry, such as mechanical engineering and the watch industry. The unemployment situation in the summer of 2023, at less than 2 percent, is also a positive highlight. The forecasts for Western Europe and the global economy point to growth of 1.1 and 2.9 percent respectively.