News and Commentary

Americans Think Corporate Profit Margins Are FIVE TIMES Higher Than They Actually Are

How far away from planet earth are Americans’ perceptions of corporate profits?

Very far. Like, 355% far.

According to this database at the New York University Stern School of Business, average corporate profit margins are 7.9% for all companies, and 6.9% when excluding the financial sector.

But as University of Michigan economist and American Enterprise Institute scholar Mark Perry points out, according to data in several polls spanning decades, Americans believe that average corporate profit margins are 36%.

Only one sector — tobacco — eclipses that figure, at 43%. Every other industry, including banks, pharmaceuticals, and oil fall well below.

The oil and gas sector, in fact, has relatively low profit margins. The most profitable corporations in the sector, integrated oil and gas companies, have profit margins of only 5.64%, while the average profit margin of corporations in the oil and gas production and exploration field is about negative 7%, far lower than corporate profits in the green and renewable energy sector of 1.27%.

H/T Carpe Diem