WSJ: Signs of Tough Times

Credit crunches in the past have sometimes coaused big economic declines and other times have not. The financial strength of corporations can make the difference. Corporations generally have good balance sheets right now but an article in the Wall Street Journal sees some negative signs:

Signs of Tough Times Ahead for Corporations

Corporations may be in for a tough year, as two new reports indicate that profits may be on the decline, while bankruptcies are expected to rise.

John Lonski, economist at Moody’s, dissects the latest data tax receipts and sees dark signs for corporate profits. Based on moving six-month totals, he says federal receipts from corporate profits were down 8.6% over last year for the six months ending in November. “Once the previous economic recovery filled out following 1992, the deepest annual decline by the moving 6-month sum of federal corporate income tax receipts was the -7.7% of April 1999,” he said. “Any recovery by profits now hinges on a recovery by business sales.