(Bloomberg) -- US corporate profits fell for a second straight quarter in the first three months of the year, according to official government data published Thursday. But that’s only because the Federal Reserve is included in the figures.

Once you exclude the central bank, the data tell a slightly different story: Corporate profits actually rose to a record in the first quarter, though the rate of increase has slowed.

The Fed has been reporting losses on its massive bond portfolio in recent quarters as it’s raised short-term interest rates, which has effectively increased the cost of funding its bond holdings above the interest it earns on the bonds. The Bureau of Economic Analysis includes Fed profits, which fell by the most on record in the first quarter, in its measure of corporate earnings. 

The BEA’s figures only report Fed profits and losses with inventory-valuation adjustments, but the agency also reports total corporate profits with another change, called the capital-consumption adjustment.

That adjustment accounts for the fact that while companies report individual profits based on historical costs, the government tweaks the figures to reflect the current cost of replacing capital stock such as equipment and structures. Because of surging inflation, the current replacement costs are potentially much higher.

The capital-consumption adjustment had a major impact on reported corporate profits in the first quarter: It subtracted $388 billion on an annualized basis, the most on record in data stretching back to 1947.

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