New Peaks

For four years, quarter after quarter, businessmen have watched with astonishment as corporate profits climbed in an almost unbroken arc. No one really believed the climb could last.that long, and both businessmen and economists several times prematurely blew the whistle on further advances. This year, in particular, many started out by predicting a halt to the gains. Last week, early reports for the third quarter indicated that profits rose to a new postwar peak of close to $45 billion after taxes. In addition, the return on investment in manufacturing reached its highest level (13.8%) since the Korean War.

Nearly every segment of the nation's business shared in the advance, thanks chiefly to a larger-than-expected third-quarter growth in the total output of U.S. goods and services ($11 billion v. an anticipated $9.5 billion). Remarkably, this gain was made without any substantial impetus from the Viet Nam war; military spending now equals only 8.6% of the gross national product, 1% less than three years ago.

The makers of durable goods, such as autos, furniture and machinery, accounted for a large part of the G.N.P. rise, and their profits grew accordingly. Food, chemical and paper producers, as well as many service industries, also showed sturdy gains. As they have for some time, corporate profits in many cases climbed even faster than sales or the economy in general. Record third-quarter earnings were reported by such giants as Colgate-Palmolive, Socony-Mobil Oil, Dow Chemical, Bank of America, Union Carbide, General Telephone, and Pittsburgh Plate Glass. United Airlines' profits were up 77% from the third quarter of last year, American Can's 29%, Celanese's 21%.

Though no great decline in profits is in sight, just about everyone agrees that the rate of gain is due for adjustment. In the past twelve months, profits have jumped an extraordinary $7 billion; in the year ahead, the Government expects an increase of only $2 billion to $4 billion. One reason: the end of the buildup of steel inventories, which has already pushed steel output down to 75% of capacity. There is also the possibility that the nation's industries, now operating at well over 90% of capacity, will be pushed into expanding faster than their markets can grow. If that happens--and economists disagree strongly over whether it is likely--operating rates could decline next year and create a squeeze on profits. Or the profit figures, which seem to have a will of their own, could fool everyone again.

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