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A season of bumper profits for some of the world's biggest corporations provides a shocking contrast to the low rates of growth and high levels of unemployment in most developed economies.

Economists say the divergence is mainly due to a comparison with the worst months of the global economic crisis last year, as well as the ability of multinationals to generate profit in high-growth emerging markets.

"People don't have the impression that everything's getting better. There's a huge discrepancy" with some of the recent earnings results, said Franklin Pichard, director of investment service Barclays Bourse in Paris.

Companies listed on the Paris CAC 40 benchmark stock index have seen their profits nearly double this year on a 12-month comparison, while the unemployment rate in the country is still nearly 10 percent.

The picture is similar in the United States, where economic growth is under pressure and employment is nowhere near pre-crisis levels.

Karine Berger, an economist at Euler Hermes, a French credit insurance company, said the figures to watch for are those from the small and medium-sized enterprise sector, which gives a truer picture.

"The real economy is small and medium-sized enterprises. Judging the situation by the earnings of major companies is falsifying the model.

"Many of the profits have been made outside of Europe or the United States. In Europe in particular the level of activity is far below what it was before."

Pichard added: "There's hasn't been a real recovery in activity ... The profits are being realised mainly on economies of scale."

Experts said profit margins for big firms are also helped by government stimulus and some of the restructuring programmes launched in recent months, which have lowered labour expenses and decreased stocks.

Some analysts believe that while profit margins may not reflect the current health of the economy they bode well for the future.

As former German chancellor Helmut Schmidt used to say: "Today's profits are tomorrow's investments and the day after's jobs."

Jean-Luc Proutat, an economist at French bank BNP Paribas, agreed.

"In the first stage of recovery, the priority is to rebuild margins ... This is often the preliminary stage to hiring and investing," he told AFP.

The big question for economists is what happens over the next few months as governments that have underwritten large amounts of private debt now try and shed some of their own debt with a series of austerity programmes.

"On an 18-month horizon, it's the main risk," Berger said.

AFP