Last 2 Times this Happened, the US was Falling into Recession
by Wolf Richter
WolfStreet.com
October 5, 2015
Revenues of the companies in the S&P 500 have been declining all year. Companies and analysts blamed the strong dollar. They blamed China. They blamed oil, Greece, Japan, and a million other things. In the first quarter, revenues dropped 2.9% from a year earlier. In the second quarter they dropped 3.4%. And in the third quarter, according to FactSet, they’re expected to decline by 3.4%.
The last time year-over-year revenues declined two quarters in a row was in 2009 during the Financial Crisis [read… Revenue Recession Spreads past Dollar, Energy]. Now there have been three quarters in a row of revenue declines.
It’s tough out there.
Given this revenue debacle, corporate earnings growth has been shrinking. By Q2, it turned negative (-0.7%), according to FactSet. And in Q3, earnings “growth” dropped deeper into the negative, now estimated at -5.9%, despite all the expert financial engineering, share buybacks, and accounting tricks that companies have been leveraging with great skill and singular dedication.
But if US-based corporations blame the strong dollar, then foreign-based corporations should benefit from the strong dollar. It’s a zero-sum game: if one loses the other gains. We’ve already seen profits soar at Japanese corporations during the early phases of the yen devaluation in 2013 and 2014.
But that bonanza is over. Companies in other countries have been struggling too, despite the strong dollar that should have been beneficial to their non-dollar financial reports. And some of the deterioration has been reflected in global share prices, which have gotten hammered, including in Japan.
The Rest…HERE
