Why is Bezos never concerned about profits??
>>WASHINGTON - The economy finished 1998 with an explosion of growth, but it wasn't enough to prevent the decade's first drop in corporate profits.
The gross domestic product (GDP) surged at a seasonally adjusted 6 percent annual rate during the last three months of the year, the Commerce Department said today.
That was down slightly from the department's earlier estimate of 6.1 percent and was enough, with earlier quarters' performances, to increase the sum of all goods and services produced within U.S. borders by a robust 3.9 percent in 1998.
However, the department's first estimate of after-tax corporate profits showed a drop of 1 percent in the fourth quarter, marking the third quarterly decline of the year.
And for all of 1998, profits slipped 2.2 percent, the first drop since 1989, when profits fell 4.8 percent in a precursor to the 1990-91 recession. The rare decline stood in marked contrast to gains ranging from 14 percent to 22 percent in the middle years of the decade.
"The economy saw a shallow profits recession last year despite the booming growth and very likely will recover from that in 1999," said economist Allen Sinai of Primark Decision Economics in New York. "But the heyday of the corporate profits boom is over."
Profits are being pinched by the combination of increasing labor costs and the inability of manufacturing companies to raise prices in the face of stiff price competition with imports from countries with devalued currencies.
A price index tied to the GDP rose just 1 percent in 1998. There hasn't been a rate that low since 1959, also 1 percent, and there hasn't been one lower since 1950.
In a separate report, the Commerce Department said orders for factory goods fell 2.5 percent in February, the most in nearly four years. A 30.6 percent drop in aircraft orders and a 38.2 percent plunge for military goods led the decline; they were joined by smaller drops for industrial machinery and electronic equipment.
Labor costs are increasing because the long expansion, which began its ninth year in March, reduced the unemployment rate to a 29-year low last year.
Plentiful jobs and surging stock prices have fueled the growth in consumer spending, which represents about two-thirds of economic activity. It rose at a 5 percent seasonally adjusted annual rate in the fourth quarter and 4.9 percent for 1998, the most in 14 years.
In addition to wages, consumers spent some of their stock gains and tapped their home equity in a wave of refinancings last year after mortgage rates fell to three-decade lows.
Those, in turn, produced a big drop in the nation's savings rate - savings as a percentage of after-tax income - from 2.1 percent in 1997 to 0.5 percent in 1998, the lowest since 1933.
Also contributing to economic growth were business investment in computers and other new equipment, up 16.5 percent last year, and housing construction, up 10.4 percent, the most since 1984.
Overseas economic turmoil held U.S. exports to a 1.5 percent increase, the weakest in 15 years, while imports shot up 10.6 percent.
That hurt export-dependent industries such as the food industry, fabricated metal products, petroleum and coal, and transportation. << |
