Debt and Deleveraging – Part 4, US Non Financial Corporate

Consumers, governments and the financial system are heavily indebted, but the non financial corporate sector is sitting on historically high levels of liquid securities and overall appears to be in much better health than any other sector of the economy:

image

Total capital expenditure (quarterly as a % of GDP) has also declined to historically low levels:

image

Which is worrying – the above chart shows 3 year and 5 year rolling percentage increases in total capex (quarterly on quarterly annualised.  Or put another way, total capital expenditure to GDP is also low with the recent recovery levels still well below pre recession levels on a 3 year rolling basis – the recovery from the low may be strong, but that is all.

image

While debt to GDP has increased to historically high levels, this increase might be balanced out by high levels of liquid assets. 

image

Unfortunately when adjusting for high levels of assets, we find that the relative debt position retains its upward bias.  Corporate profits are also at historically high levels :

image

But taxation has been falling and so have wages and salaries as a % of gross domestic income:

 image

And even historically high profit levels are biased towards structural imbalances:

image

image

So companies might be fine if it were not for the state of the economy.  US corporations remain exposed to US domestic demand weaknesses and global  economic dynamics.  Debts are high, but not outrageously so after adjusting for cash balances, but overall, corporate profits, cash levels and other dynamics would appear to be backward looking indicators.

Source for the above charts was taken from the Federal Reserve flow of funds accounts and the Bureau of Economic Analysis data sets.

Leave a Reply