What's Up?

Everybody had been prepared for some pretty glum news when the profits accounts for 1949's first six months were totted up. Last week, with most of the earnings figures in, the news was surprisingly good. Out of 425 companies reporting, about 40% had bettered their 1948 profits; only 27 companies lost money.

General Motors, one of the biggest single U.S. employers, was acting as if it had never heard the word "recession." First-half profits hit an astronomical $303.7 million, 46% above 1948. The reason: as steel became plentiful this year, G.M. was able for the first time since the war to push its production throttle to the floor board. G.M. intended to keep it there: next week, Chevrolet's Flint plant will add an extra shift to step up production from 480 cars a day to 680. In 1949's second quarter, G.M. had already broken all previous quarterly production records by turning out 792,346 cars and trucks.

Although the steel industry had been Gloomy Gussing for weeks as its production rate sagged and its backlog of orders thinned, first-half earnings for many companies were the best in history. U.S. Steel's $94 million net was up 76%, Bethlehem's $59.9 million a shade less than 100%. But Bethlehem's Chairman Eugene G. Grace, who first warned against slackening steel demand six months ago, now said: "We have been living on our accumulated fat ... and it is getting thin."

The public utilities, once so ailing, were doing almost as well as steel and autos, thanks to a bracing tonic of rate increases. Southern Bell Telephone & Telegraph, A.T. & T. controlled, boosted its net 77%.

The oil industry, king of last year's profit parade, was still doing all right. But with crude oil once more in surplus and prices again competitive, the industry continued to slide from its boomtime peak. Phillips Petroleum's net dropped 40% from $36.5 million to $21.9 million, Socony-Vacuum's from an estimated $71 million to $47 million, down 34%.

Paper companies, whose expansion had caught up with their worst shortages (e.g., newsprint, kraft paper), also were looking more normal. St. Regis' net was down from $8.7 million to $3.2 million.

But U.S. airlines fulfilled their predicted jump into the black (TIME, July 18). Eastern Air Lines' $2.1 million net was up 63%, Northwest Airlines' $430,915 profit helped offset a $2,016,000 deficit in 1948's first half.

All in all, it still looked like a peculiar kind of recession.

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