Do profit margins change significantly depending on the position in the economic cycle?

We look at the situation of the United States and the euro zone. If corporate profit margins follow the cyclical position of economies, the result is a fall in inflation when growth is weak, and a rise in inflation when growth is strong. We compare profit margins with various indicators of the economy's cyclical position: GDP growth, output gap ( as measured by the OECD or constructed by us), unemployment rate. We find that profit margins are correlated with all measures of the economy's cyclical position in the euro zone, but not in the United States. The historical trend in profit margins clearly shows this marked difference between the United States and the euro zone.