The current profit and economic growth outlooks of many analysts are too rosy, warns National Bank Financial.

“In our opinion, current profit and economic growth expectations are just too high in the current context of rising interest rates, surging energy costs and eroding purchasing power for consumers,” NBF says in a research note.

Earnings season for the third quarter goes into full swing this week with 126 companies of the S&P 500 reporting their results. NBF says that the quarter is again expected to “produce a good vintage”, with analysts expecting 15.6% year-over-year profit growth, the ninth consecutive quarter of double-digit earnings growth according to First Call.

And, it notes that expectations remain extremely bullish with the bottom-up consensus calling for double-digit earnings growth through the end of next year. “If realized, this would surpass the… record of longevity set between Q4 1992 and Q4 1995,” it says.

“Economists, not to be outdone by analysts, are also very bullish by assuming real GDP growth in excess of 3% through 2007,” it adds.

“Embedding the analysts’ estimates to that of economists’ implies that profit margins would increase to a level not seen since the early 1960s,” NBF calculates. On that basis, it concludes that expectations are simply too high.