The BEA released its final estimate of GDP growth and the national income account for 2005. The figures on GDP show no surprises. But the news release also highlights corporate profits in 2005. The figures show that 2005 was a good year to be an owner of a corporation:
Profits from current production increased 16.4 percent in 2005, compared with an increase of 12.6 percent in 2004. Domestic profits increased 17.4 percent, compared with an increase of 14.1 percent. The rest-of-the-world component of profits increased 11.2 percent, compared with an increase of 5.1 percent.
Taxes on corporate income increased 39.5 percent in 2005, compared with an increase of 16.8 percent in 2004. Profits after tax with inventory valuation and capital consumption adjustments increased 9.4 percent, compared with an increase of 11.3 percent.
The one strange thing, however, is that the managers of corporations in the US are choosing to retain more of those profits in the company, rather than spend them or give them back to shareholders:
Dividends increased 4.3 percent [in 2005], compared with an increase of 16.5 percent [in 2004]; current-production undistributed profits increased 15.7 percent, compared with an increase of 5.5 percent.
The dividend payout in 2004 was significantly distorted by Microsoft’s special $30bn dividend payout in December of 2004… but even so, corporate managers seem to be keeping a lot of 2005’s profits on hand until they decide what to do with all of that money.