More Power to Them

Because they give businessmen both the impetus and the means to hire, build and modernize, profits are the power behind economic exuberance. By that gauge, the current prolonged business expansion stands a good chance of continuing. The Commerce Department reported last week that profits after taxes rose to a near-record annual rate of $26.8 billion in the second quarter, up 5 1/2 from 1963's first three months. More important, profits have been moving up for nine quarters--about twice as long as in any previous postwar recovery.

The profit climb has continued because of the happy conjunction of strong demand, stable costs and increased productivity--and economists are as pleased about it as executives. But their optimism was somewhat tempered last week by uneven reports on the economy's performance in August: though personal income rose to a record annual rate of $465 billion, manufacturers' new orders slid 2%, and industrial production fell a point to 125.6% of the 1957-59 average--due largely to the auto industry's shutdown for model changeovers. Washington's experts expect that production will pick up speed with the 1964 cars and that profits will continue to advance, even if not so fast as before. For the full year, profits probably will reach an alltime high of $27 billion, v. $24.65 billion in 1962.

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