What Happened to the Slowdown?

After the profit fall-off that they predicted for 1968's first half failed to materialize, U.S. economists waited for the new 10% income-tax surcharge, which affects corporations as well as individuals, to cut back profits in the third quarter. The year may. turn out to be a lot tougher for economists than for corporations. Instead of a slowdown, a Wall Street Journal survey of 438 early-reporting companies found combined third-quarter earnings up by a robust 13.6% over the same period a year ago. A sampling:

> Oil companies, fueled by record world wide production and strong prices on the domestic market, generally improved on their 1967 performances. Standard Oil of New Jersey, the industry leader, earned $316 million during the quarter, 4% above the same period last year, a showing that pushed profits for the first nine months to an alltime high of $937 million. U.S. Shell also set a record with its quarterly profit of $82.7 million, while Atlantic Richfield gained 15% over last year, Texaco and Mobil 11% each and Gulf 10%. Among the few exceptions to the industry pattern was Sinclair, which suffered a 56% profit decline during the quarter (to $9.5 million). No matter. The company's stock spurted from 79 5/8 to 92 1/8 on the New York Stock Exchange last week amid rumors of possible takeover attempts by several companies, one of which, Gulf & Western Industries, announced that it was indeed planning a tender offer for Sinclair stock.

> Chemical makers gave continued strong evidence of pulling out of last year's torpor. Du Pont, which despite the slump has still remained the world's biggest chemical manufacturer, reported quarterly earnings of $95 million, a 28% increase over last year, and nine-month earnings of $281 million, up 23%. Du Pont benefited from a steady improvement in the synthetic-fibers business, notably nylon, Orion and Dacron, a field that accounts for one-third of the company's sales. Other profit increases within the industry as a whole ranged from 1.4% at Dow Chemical to 46% at Monsanto.

> The auto industry, which had been concerned that the federal surcharge might dampen consumer demand, need not have worried. With auto buyers in a free-spending mood, Chrysler turned a $29.9 million profit during the quarter, up 11% over 1967. General Motors moved ahead even more, posting a 22.3% earnings gain, to $182 million. But no automaker was more gratified than Ford, which earned $72.1 million in the third quarter. During the same period last year, Ford had to bear the brunt of a 49-day United Auto Workers strike and wound up with a $73.9 million loss.

> Manufacturers performed well in a wide variety of other industries. Eastman Kodak, the world's biggest photographic company, set records in both sales ($664 million) and earnings ($106 million) during the July-September quarter. Not to be outdone, Xerox Corp., a Rochester, N.Y. neighbor of Kodak posted a record of its own; its quarterly earnings were $29.2 million, 16% ahead of last year. Among other manufacturers, Honeywell increased third-quarter profits by 16% to $11 million, textile-making Burlington Industries by 30% to $19.68 million and Georgia-Pacific, a forest-products firm, by 22.5% to $20.06 million.

Not all companies, of course, shared in the surge, but those that experienced difficulties could usually blame special circumstances within a single industry rather than any slack in the economy as a whole. Most steelmakers, for example, suffered because customers were still working off big stockpiles accumulated in anticipation of a steel strike that never came. The dearth of new orders resulted in a 31% earnings decline for Republic Steel, 57% for Youngstown Sheet and Tube, 86% for Jones & Laughlin. At Armco Steel, the industry's fourth biggest company, however, profits rose by 55% (to $17 million) above their dismal level of a year before. If the industry strike had come, it would not have affected two of Armco's biggest plants, a fact that prompted many customers to place heavier than usual orders with the Ohio-based steelmaker.

American Tobacco was another case of a company outperforming the rest of the industry; American, which lays claim to being the biggest U.S.-based cigarette company since its recent takeover of Britain's Gallaher Ltd. (Kensitas and Senior Service), reported record third-quarter earnings of $25.5 million. With cigarette consumption leveling off while costs continue to climb, profits dropped slightly at both Reynolds Tobacco and Lorillard. American avoided a similar fate largely because its balance sheets reflected the earnings of recently acquired Duffy-Mott Co., a New York-based food processor, and good old Gallaher.

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