Business Is Improving, But Not Profits

Just as the U.S. economic recovery finally seems to be picking up profit margins seem to have peaked.

Stronger GDP growth should help domestic revenue pick up. But belt-tightening may have run its course while commodity and labor cost pressures start to build.

Operating profit margins for the S&P 500 companies have risen for seven straight quarters, as corporations used sharp cost cuts to leverage modest sales gains. But they likely dipped to 8.81% in Q4 from Q3′s 8.95%, predicts Howard Silverblatt, senior index analyst for Standard & Poor’s.

GAAP profit margins, which include various charges, peaked in Q2 at 8.31%, fell to 8.11% in Q3 and likely sank to 7.23% in Q4, according to Silverblatt.

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