Sunday, April 29, 2007

Weak growth, big profits

The current economic expansion is the weakest in the post WWII period. But, corporate profits are experiencing the “most vigorous expansion” in the post war period.

That's from Lawrence Chimerine, Radnor International Consulting, speaking at a meeting Saturday of the Investment Management Consultants Association in Phoenix.

Profits have grown at two-and-a-half times revenue growth rates, profit margins are probably the highest ever, and certainly are the highest in the last 50 years, Chimerine said. Yet, businesses have lost most of their pricing power, keeping inflation at bay. “Wal-Mart does more to keep inflation under control than the Fed,” the economist said. But the Fed “sees an inflation problem that doesn't exist.”

And overall, it's not a pretty picture for workers: They're being squeezed—with no corresponding increase in wages--to maintain the “magic bullet” of productivity growth.