US firms profits 'to fall 7.5% in 2008'

Added: (Mon Jan 14 2008)

Pressbox (Press Release) - Profits for US companies will fall this year, as the economy slows, a financial research consultancy has predicted.

A new study from Capital Economics predicts that profits will dip by 7.5 per cent during 2008, as the full impact of the sub-prime mortgage crisis is felt.

Paul Ashworth, senior US economist at Capital Economics, told City AM that the wider economic slowdown will more than offset "any boost to earnings from the weaker dollar".

He added: "We expect further falls in US equities in the first half of the year – with the S&P losing another five to ten per cent from current levels of around 1,400 - before equities rally again the economy stars to recover in the second half."

News of Capital Economic's projections comes as Goldman Sachs this week predicted that the next two to three quarters will be period of contraction for the economy

The banking giant cut its growth forecast for 2008 from 1.8 per cent to 0.8 per cent - and also announced it expects the Federal Reserve to cut interest rates in response, taking the federal funds rate down to 2.5 per cent by the close of the year.

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