WSJ: Sagging US Corporate Revenue Bodes Ill for Economy

Tuesday, 30 Apr 2013 08:13 AM

By Dan Weil

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While companies are reporting strong first-quarter profit figures, their revenues are stagnating, and that could spell trouble for the economy.

Companies such as IBM, United Technologies, 3M and Xerox missed their revenue forecasts for the first quarter, The Wall Street Journal reports.

The culprits: Europe’s weak economy, a rising dollar and disappointing U.S. consumer spending.

Editor's Note:
 
Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

First-quarter revenue for companies in the Standard & Poor's 500 Index is expected to contract 0.3 percent from a year earlier, according to data from Thomson Reuters cited by The Journal. That would mean revenue has failed to expand by 1 percent or more in three of the last four quarters.

That, in turn, indicates business and consumer demand remains weak, The Journal points out. Already, the economy grew a smaller-than-expected 2.5 percent in the first quarter, and economists anticipate a slowdown in coming quarters.

"The lack of revenue growth really doesn't justify new head count or capital expenditure," Jim Russell, senior equity strategist at US Bank Wealth Management, told the paper. "This is one of the reasons we see a stagnating sticky high unemployment rate."

Unemployment stood at 7.6 percent in March.

Stocks, of course, haven’t suffered much from the weak sales data. "The expectation is that the data is so bad, it's good for central banks around the world to keep the foot on the pedal," Sam Turner of RiverFront Investment Group told USA Today.

Much of the stock market’s strength has stemmed from central bank easing, experts say.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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