The trend in US corporate profits is what you think it is
In my research for an article about the cross section of national income, I ran across this piece in Forbes by Tim Worstall. In this article, he uses proprietary Bloomberg and WSJ data for 2012 corporate offshore cash holdings to assess that corporate profits abroad are driving a reasonable share of the increase in the BEA’s measure of corporate profits: (see my post from Monday, or Ed Dolan’s post from June):
“there’s a simple enough explanation for at least part of it: simply globalisation.
Now what is it that we know about American companies and their profits? Something that has rather changed over the past decade or so? Yes, that’s right, we’re in a huge period of globalisation. So much so that US companies are now making very large profits outside the US economy. Apple AAPL -1.58% is making phones (or having made for it) in China and selling them in Europe. This isn’t, in any real sense, part of the US economy. The same goes for Google GOOG -1.53%, Microsoft MSFT -11.37% and however many other companies you want to study. Profits are being made offshore, out there in the global economy.”
But this is just wrong. According to the Bureau of Economic Analysis (see Table 12 of the BEA Q1 2013 release), aggregate corporate “rest of the world” profits – i.e., large US corporations with earnings abroad – declined $8.9 billion in 2012.