1987 Corporate Profits Jump 8.4%

Corporations’ after-tax profits shot up 8.4% in 1987, the best performance in three years, as American manufacturers benefited from the weaker dollar, the government reported Wednesday.

The Commerce Department said after-tax profits rose to $137.4 billion last year, the first increase since a 12% rise in 1984.

In 1985, corporate profits plunged 12.3% and they dipped another 1% in 1986 as the widening trade deficit cut into sales by American manufacturing firms.

U.S. companies have been enjoying an export boom this past year as declines in the dollar made American products competitive again on overseas markets.

“For U.S. manufacturing, 1987 was a turnaround year. Exports rose and American companies benefited tremendously from previous cost-cutting measures,” said Allen Sinai, chief economist for Boston Co.

Analysts said the rise in profits was particularly significant because it occurred at the same time corporate taxes were being boosted substantially by the landmark 1986 tax law.

Sinai predicted further gains in corporate profits in 1988, estimating that they should rise by between 6% and 7%.

“We will see continued increases in corporate profits until the start of the next recession,” he said.

The report said the dividends corporations paid to stockholders rose along with their improved profit picture, increasing 8.1% to $93.8 billion. This followed a 6.8% increase in dividends paid out in 1986.

For the fourth quarter, after-tax profits rose 1.6% at a quarterly rate following a 5.5% increase in the third quarter.