Corporations’ after-tax profits shot up 14.6% in 1988, the best showing in five years, the government said Thursday in another report cited as evidence of last year’s strong economic picture.
The Commerce Department said after-tax profits rose to $163.8 billion last year after a 10.1% gain in 1987. Last year’s advance was the biggest since a 22.4% post-recession jump in 1983.
After-tax profits were up 2.8% in the final three months of 1988, to a seasonally adjusted annual rate of $173.9 billion, after advancing 3.9% in the third quarter.
The report said increases in manufacturing profits were strongest in the chemical industry. Profits also increased in the trade, transportation and public utilities sectors.
Analysts said that with the economy likely to slow this year and production and materials costs rising, the corporate profit outlook for 1989 is not as bright as last year.
“At this stage in the business expansion, profits are going to lose momentum,” said economist Allen Sinai of the Boston Co. “1988 was a terrific year for the economy and for corporate profits. Profits did extremely well because of good sales and low costs. But we’re past the best times in profits.”
He projected that after-tax profits this year would increase by 5% to 6% and could then decline in 1990.
Among the details in the profits report:
* Before-tax profits rose 1.8% last quarter, to a seasonally adjusted annual level of $319.5 billion, after rising 2.6% in the third quarter.
* Corporate profits, after adjusting for depreciation and inventories, rose 3% last quarter, to a seasonally adjusted annual rate of $339.9 billion, after rising 1.1% in the third quarter.
* Corporate cash flows, a measurement intended to show the funds corporations have for investment, increased 3.2% last quarter, to a seasonally adjusted annual rate of $409.2 billion, after rising just 0.8% in the third quarter.
* Dividend payments to stockholders rose 2.2% in the fourth quarter, to an annual rate of $108 billion, after a 2.5% rise in the third quarter.