By Lee Adler
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Weak corporate tax collections in the first quarter and through April 11 could mean that many quarterly earnings reports may surprise the market by failing to meet analysts' inflated expectations. Either corporate profits are falling sharply or else corporations have suddenly become much savvier about offshoring income and avoiding taxes. While they may be getting better at avoiding taxes, it seems unlikely that they've suddenly all become such geniuses at it simultaneously. My bet would be that when everybody has reported, aggregate earnings will fall short of consensus estimates.
The Treasury Department publishes daily data on tax collections. As of 5 PM each weekday it releases the Daily Treasury Statement for the previous day. That's as close as we can get to a real time economic barometer short of being at the cash register. It's definitely useful in gauging whether subsequent corporate earnings reports will meet, beat, or miss expectations. Corporate tax collections and subsequent reported aggregate earnings have correlated well historically, not just in terms of the trend, but even to the extent that the peaks and valleys in tax collections are echoed at lower amplitude in the earnings line.