Thursday, March 2, 2017

Economy Review GROSS PROFIT 03/02/17

You have read how high corporate profits had gotten.  This is considered good as it theoretically leads to more investment.

I chose to look at gross profit instead.  That is sales minus directly variable expenses like materials and labor. This is not affected by depreciation and inventory adjustments nor taxes and extraordinary items.

The charts below are growth rates from a year ago.  The top one is simply the rate of change of the dollars of gross profit.  As you can see the good news is that it has stopped getting worse.



Next is a bad sign.  It is the gross profit by units.  Above, gross profit is growing because sales are growing even if more slowly.  Good.  Volume is growing.

But when looking at the gross profit per unit produced, we see that margins are really shrinking.  Again the good news is that it looks like it isn't getting worse.




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