Forecasting profits in Europe

The economic crisis the euro area is experiencing has strong implications for the balance sheets of the corporate sector . Not surprisingly, c orporate profits tanked in the first part of the year as growth collapsed . In this report, we show that under our macro-economic picture corporate profitability in the four biggest countries of the e uro ar ea (Germany, France, Italy and Spain) will be negative until the first quarter of next year. We also assess the typical dynamic behavior of profits after an adverse growth shock . We find that t he impact of a negative shock to economic activity has a long-lasting impact on the corporate profits .