Eurozone corporate profitability

I have been trying update the position on US corporate profitability but have been unable to do so while the US government was shut down.  Now it has opened up again, I shall get back to that task.  In the meantime, I cam across a new analysis of the state of Eurozone corporate profitability hidden deep in the latest IMF report on Global Financial Stability (GFSR,, which looked at the profitability of large and small corporations in five Eurozone economies.  The IMF aggregated corporate earnings before tax and interest payments against assets based on firm-level annual data from the Bureau van Dijk’s Amadeus database. The sample includes more than 3 million non-financial firms, both publicly traded and private, from France, Germany, Italy, Portugal and Spain.

Eurozone profitability

The analysis finds that corporate profitability in those five countries remains well below the peal levels of 2007, with the exception of German companies.  French corporate profitability was 18% below its 2007 level in 2011, Spain’s was 30% below and Italy and Portugal was 22% below.   Given that 2012 was year of recession or even depression for most Eurozone economies, profitability is unlikely to have recovered last year or even this year.  Only German companies have done better since the trough of the Great Recession in 2009, but even so profitability there is still 8% below the 2007 peak.

The IMF’s data confirm my own measures based on the EU’s AMECO macro database.


So even if US corporate profitability has more or less recovered to the level of 2007 (and that I still to need to analyse), the Eurozone’s capitalist sector remains in the doldrums, thus keeping investment and economy recovery down.

2 thoughts on “Eurozone corporate profitability

  1. Michael,

    Interesting data, and the fall in the rate of profit is consistent with my own view that we have passed a conjuncture from the Spring to Summer Phase of the Long Wave. US data from the third quarter earnings season also seems to suggest that although the volume of profits continues to rise, it is rising at a slower pace, and the rate of profit may well be falling.

    However, you say,

    “So even if US corporate profitability has more or less recovered to the level of 2007 (and that I still to need to analyse), the Eurozone’s capitalist sector remains in the doldrums, thus keeping investment and economy recovery down.”

    But, that does not necessarily follow. As Marx points out accumulation can actually increase even when the rate of profit is falling. For example, if the prices of commodities are falling, capitalists may need to spend less to buy the same quantity, and so have more surplus value to use for productive as opposed to unproductive consumption.

    But, also, as Marx points out, capital not only accumulates money-hoards of realised surplus value waiting to be invested in productive-capital when it considers the time is right, but also amasses similar hoards as depreciation funds, and both can be used interchangeably. We know that over the last 30 years, such huge money hoards have been amassed as sovereign wealth funds, an cash balances on the balance sheets of huge corporations. Over that time they have often sloshed around in the circuit of money rather than the circuit of capital, blowing up asset price bubbles in property, shares and bond markets.

    But, if the rate of profit is falling, the supply of potential money-capital will fall, whilst the demand for money-capital will rise, as corporations seek to maintain market share via innovation, and to raise profits by investment in new products, technologies etc. So, the rate of interest will rise, and we see that happening in global bond markets already. Rising interest rates will mean that bond markets will fall – possibly abruptly – and so will property and equity markets.

    So, investment in actual productive capital will become a better alternative. There is certainly no shortage of potential money-capital to bring that about. But, the real question, at the moment is if you are an individual productive capitalist, why would you risk that when as the US political crisis has just shown, the future for economies and for demand is so uncertain?

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