THE ECONOMY : Corporate Profits Up 6.7% in Quarter, U.S. Reports
After-tax corporate profits jumped 6.7% from July through September, the government reported Wednesday. Some analysts said the rise primarily was due to inflation.
“Most of the gain was basically inflation profits,” said economist Bruce Steinberg of Merrill Lynch Capital Markets in New York. “If you take away those, profits actually were declining in the third quarter.”
Nevertheless, the Commerce Department said the gain was the largest since an 8.9% advance in the first quarter of 1988. It followed a 0.6% decline in the second quarter, which erased a weak 0.5% increase in the first.
Analysts attribute the sluggish after-tax profit picture to the weak economy. The department reported on Wednesday that the gross national product--the nation’s total output of goods and services--advanced at a lackluster 1.7% annual rate from July through September.
Many analysts believe that the economy now is in a recession, where profits typically decline 15% to 20%. Some believe, however, that the downturn will be mild and short-lived, leading to a smaller decline.
After-tax profits totaled $177.2 billion at an annual rate in the third quarter of 1990.
Among the details of the report:
* Before-tax profits, which totaled $315.4 billion at an annual rate, rose 5.4% in the second quarter. Before-tax profits were up 0.8% in the second quarter and 2.4% in the first.
* Corporate profits, after adjusting for depreciation and inventories, fell 3.8% in the third quarter to an annual level of $294.9 billion. They rose 3.3% in the second period and 2% in the first.
* Corporate cash flows, a measurement intended to show the funds corporations have for investment, dropped 3.2% from July through September to an annual rate of $387.2 billion. That follows an increase of 1.7% in the second quarter and a loss of 0.7% in the first.
* Dividend payments to stockholders increased 1.6% to an annual rate of $135.1 billion after gains of 2.1% in the second quarter and 2% in the first.
