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What do corporate profits mean for us?

Corporate logos for Pfizer, Caterpillar, DuPont, Wells Fargo

TEXT OF STORY

Kai Ryssdal: And the corporate hit parade reads something like this: Caterpillar, Pfizer, Wells Fargo, DuPont.... Just a few of the companies that have reported better-than-expected profits so far this quarter. There are more to come, or so the folks who track these kinds of things tell us. So, good news on the corporate health front means a recovering economy, right? Mmmmmaybe.

Marketplace's Alisa Roth reports.


ALISA ROTH: Don't get all excited yet about the economy getting better. These companies may be more efficient than they were before the recession. But most of them aren't actually selling more of the stuff they make or the services they offer. It's just that all the layoffs and other cost-cutting they've been doing the last year are finally showing results.

Gary Thayer is a strategist at Wells Fargo Advisors. And he says this is just what usually happens in a recession.

GARY THAYER: Companies have a lot of excesses going into the downturn, and they need to clean up those problems before they can escape the recession and get back to growth.

And he says it looks like companies are ready to start growing again. So is the economy.

Art Hogan is a market analyst at the investment bank Jeffries and Company. He thinks the signs of recovery are real.

ART HOGAN: What these earnings can tell us is we've moved off the bottom in this cycle and we're on the road to repair here.

But it's not just that companies have "right-sized themselves" as the analysts like to say.

Gary Thayer, from Wells Fargo, says the weak dollar is helping a lot, too.

THAYER: As the dollar goes down that makes American products a little more attractively priced to foreign buyers. But also a lot of American companies are international, so any money that they earn overseas, the value of those earnings tend to be higher if those countries' currencies have gone up in value.

American companies can't count on the dollar being weak forever. And most of them have already cut back as much as they can. So if the economy's really going to grow, companies need to start finding ways to make money. Not just save it.

In New York, I'm Alisa Roth for Marketplace.

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