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Behind U.S. GDP Data Is Reason for Recession Worry: Weak Profits

  • Earnings fell in 2015 by most in seven years, figures show
  • Drop is `bad news' for the economy, IHS's Behravesh says

On the face of it, the latest government update on how the U.S. economy performed in the fourth quarter looked a bit more encouraging. Growth was revised to a 1.4 percent annualized pace from a previously estimated 1 percent, and the adjustment to gross domestic product was for a good reason -- consumer spending rose more than previously thought.

Yet beyond the headline number, there is a reason for some concern. Corporate profits plunged 11.5 percent in the fourth quarter from the year-ago period, the biggest drop since a 31 percent collapse at the end of 2008 during the height of the financial crisis. For 2015 as a whole, pretax earnings fell 3.1 percent, the most in seven years, according to the Commerce Department.