Tuesday, June 14, 2011

Earnings Looking Strong

We talked last week about solid movement in the trade deficit and in consumer confidence, and today we have good news in an area that's potentially far more important than either: corporate profits. Earnings have been growing at an annual pace of 29.9 percent over the eight quarters that ended in December 2010. That's the strongest such period we've seen in more than 50 years.

And earnings are expected to continue to show strength for a while now. A new report from JPMorgan Chase projects that corporate earnings will average more than 10 percent a year through 2013, or more than three times the projected growth in the economy. One source of strength: Overseas earnings, which have grown at 12 percent annually over the past decade. That's one upside to the weakened dollar.

Four big retailers report their earnings this week: Best Buy does so today, and Kroger, Pier I and Smithfield all do so on Thursday. That should give us a good read on how realistic these earnings projections are, as well as the lay of the land for consumer spending.

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