Corporate America's 2021 profits were higher than ever
Corporate America’s profit margins started strong and stayed high all throughout 2021.
That's according to financial data company FactSet. According to the firm, the second quarter of 2021 saw a 13.1% profit margin among the companies of the S&P 500. The 4th quarter showed a slight dip but a still-elevated level of 12.4%. The numbers stretch 54 quarters — to the middle of 2008 — and reveal that the 4 best quarters for corporate profits in recent history all happened last year.
This data could provide ammunition for progressive Democrats and other corporate critics who have been charging for months that businesses largely responded to the pandemic and recent surge in inflation with "price gouging."
Corporations are utilizing “their ability to ‘drive price’ and not leave any pricing on the table,” says Lindsay Owens, the executive director of the left-leaning group Groundwork Collaborative.
Owens and her colleagues embarked on a project to monitor corporate earnings calls since last summer. Early on, she says, CEOs “were a little surprised that consumers were forking over money at these higher price points.” But now she says the view of business leaders is we are "capitalizing on this phenomenon, we're exploiting it and we're pressing it to the hilt and we're going to take it until we touch the stove.”
Slightly different historical measures of corporate profits finds profit-levels in the last decade have been well above historical averages, meaning 2021 was likely the best year for corporate profits since World War II or longer.
‘A very lucrative space’
The issue of growing corporate profit margins has attracted scrutiny from Democratic figures like Senators Elizabeth Warren and Bernie Sanders. Earlier this month, Congress held a hearing focused on "pandemic profiteers" and, in a recent Yahoo Finance interview, Rep. Alexandria Ocasio-Cortez attributed recent price hikes not to inflation but to just "straight price gouging by corporations."
President Joe Biden and his aides have highlighted specific instances of price hikes, focusing on industries like meatpackers, energy firms, and companies involved in the supply chain. They have focused on corporate consolidation in these industries as a key driver of higher prices.
Owens agrees that consolidation plays a role and adds that consumer expectations contribute, as well.
There's "a very lucrative space between passing on input costs, which consumers understand and know need to happen in this moment, and the average consumer's understanding of what those in input costs are," she says.