Profits and growth in the USA

Was America’s “new era” of faster productivity and profits growth a figment of fevered imaginations or a genuine advance? Our detailed examination gives grounds for cautious optimism about the longer term. Trend productivity growth could stay above 2% a year, as long as labour and product markets remain vigorously competitive. If so, trend company earnings could grow close to 3% a year in constant dollar terms, beating the long-term historic average. The uncertainties are great, however, not least in the nearer term when economic recovery could disappoint.