...The combination of falling corporate profits and the need for companies to pay off a growing amount of debt sounds alarming. So we can expect minute attention to corporate balance sheets as the year progresses, while the pressure on the Federal Reserve not to raise rates will remain intense.
But there is some good reason to hope that the profits picture isn’t as bad as it appears. Watling of Longview Economics points out that the tax reform of late 2017 also gave companies an incentive to accelerate depreciation charges to take advantage of new capital allowances. As the NIPA accounts show, there was a big rise in depreciation, which was unrelated to any transactions in cash:
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