New Strength in the Boom

Much to everyone's surprise, the third-quarter-earnings reports that poured out last week were far better than expected. The new surge in the great boom had boosted profits until, on the average, they were running well ahead of 1951. Aggregate profits of 386 key companies in 24 industries were 7.4% higher than in 1951's third quarter. This was the first overall increase since the post-Korean buying spree in 1951's first quarter.

Actually, the gain was not as big as it looked; some of it simply reflected bookkeeping adjustment. Last year's third-quarter profits were hit hard by Congress's big retroactive tax bite which came out of the third quarter in one big chunk. U.S. Steel, for example, set aside an added $26 million in taxes to pay the bill. It was also helped by a $5,000,000 tax credit under the excess-profits law, since this year's actual profits were below last year's. Consequently, Big Steel was able to show a third-quarter increase (92-c- per share v. 83-c- in 1951) in spite of the steel strike.

Bounce Back. Although such bookkeeping and tax adjustments made comparison tricky, many of the gains reported last week were based on growing sales. For example, the giant Du Pont chemical empire in September had the best monthly sales in history ($146.7 million), and although its nine-months' earnings were off slightly ($3.26 v. $3.34), the third quarter showed a big rise, from 84-c- to $1.14. And General Motors was not only up for the quarter ($1.31 v. $1.01), but for the whole nine-month period ($4.32 v. $4.14).

Some industries were still far below their 1951 level (notably textiles and coal mining--each off 49%), but textiles had already begun a recovery. And the television industry, bouncing back from its slump, reported aggregate profit showing a 361.1% rise. Rearmament helped some other big rises: 105.7% for aircraft manufacturing; 99.3% for electrical equipment.

Growth Ahead. But most of the gains were due to better civilian business. New York department-store sales, which had been running below 1951, spurted ahead of last year's sales, and merchants were predicting a record Christmas trade. Last week the kingpin auto industry finished its biggest month's production (610,676 units) in 16 months, and got the promise of bigger steel allotments in 1953's first quarter. Steelmen themselves reported enough orders to keep their mills at capacity production for at least five months. The big rise all around was reflected by the Commerce Department's report of a $74.8 billion backlog of unfilled orders for manufacturers of all types; that was $10.1 billion higher than a year ago. And the Federal Reserve Board's index of industrial production for September was the highest (225) since May of 1945--and still rising.

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