The US corporate profits fell in the first quarter by the most in almost two years as some companies struggled to offset surging costs while the overall economy shrank in the period.
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In January-March, gross domestic product decreased at a 1.5% annualized rate compared to an initial 1.4% decline, Commerce Department data showed Thursday. Consumer spending, which accounts for the majority of the economy, went up an upwardly revised 3.1%.
The first read on business earnings for the period was included in the report. Pretax corporate profits decreased by 2.3% from the previous quarter and were up 12.5% from a year ago. The last year was the most profitable year for American companies since 1950.
Many companies are trying to pass along the costs of materials, shipping and labor to customers through higher selling prices, because of rising costs for materials, shipping and labor. Consumers are grappling with decades-high inflation because input costs keep rising.
In recent weeks, retailers like Target Corp. and Walmart Inc. have cut their forecasts for profit this year due to bloated inventories and price increases that didn't keep pace with rising costs.
Consumer spending was revised higher, but the report showed downward revisions to inventories and residential investment.
The first quarter figures belie a solid pace of consumption despite the decline in GDP. The contraction was largely a result of an import surge tied to solid consumer demand.
The US economic growth is expected to rebound in the second quarter due to consumer spending and a smaller trade category, according to economists. Inflation-adjusted spending rose 0.7% in April, according to the data released Friday.
What companies are saying. The first estimate of second-quarter GDP will be released on July 28.
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