While U.S. citizens have been struggling with rising inflation over the past few months, corporations have reportedly netted record profits during the same period.
The data are an indication that companies have largely been successful at passing over rising material and labor costs to consumers. While some customers might have cut down on spending due to inflation, some firms have been able to offset such loss of demand by charging customers who continue to buy their products.
Profits of domestic nonfinancial corporations rose by $173.9 billion in the second quarter, compared to a $4.8 billion decrease in the first quarter.
While companies made high profits during the second quarter, customers faced high inflation rates of 8.3 percent, 8.6 percent, and 9.1 percent in April, May, and June, respectively.
The Profit Controversy
Rising profits of companies during the COVID-19 pandemic and inflation have been a hot topic of debate, with some criticizing firms for benefiting while everyday Americans struggle.“And even worse, these same companies increased spending on shareholder handouts by nearly $45 billion year over year for a total of $79.1 billion,” the organization said.
The current earnings season is also seeing a continuation of companies reporting high earnings. More than halfway into the second-quarter reporting period, company earnings are estimated to have risen by 8.1 percent compared to a year ago. This is higher than the 5.6 percent increase estimated in July, according to data from financial market data provider Refinitiv.
On the plus side, higher corporate earnings allow businesses to accommodate demands of higher compensation and benefits by their employees.