A Record-Smashing Record

Sports lovers have debated in recent years whether athletes could go on breaking records indefinitely, but there seems to be no question about continued record-breaking when it comes to U.S. business. For 41 months now, businessmen have watched record after record crumble with computer speed until new economic tidemarks have become the rule rather than the exception. Since the economy, like the athlete, gets bigger and stronger over the years, there seem to be no practical limits to its performance. Never has it performed better than in the first six months of 1964.

Faster than Sales. The first-half reports that came flooding in last week broke scores of records, and nearly every segment of the economy contributed its share. As has come to be almost expected, giant General Motors led the field by announcing, for the third quarter in a row, the highest sales and earnings of any company in history. The impressive total: first half sales of $9.8 billion, profits of $1.1 billion. Ford and Chrysler also reported alltime high earnings for the half.

New profit highs were also reached by such varied companies as Du Pont, Motorola, Texaco, Sun Oil, Minnesota Mining, United Air Lines--and those that did not set new marks contented themselves with hefty hikes. B. F. Goodrich raised profits 15.5%, and Reynolds Metals 25%. The nation's second largest railroad, the Pennsylvania, was up more than 500% in the first half, and the third biggest road, the New York Central, turned a $4,400,000 loss into a $10.7 million profit. If the second half continues at the first-half pace--which ran ahead of all estimates--U.S. corporations will earn between $34 and $35 billion in 1964, a performance that would outshine 1963's record by more than 25%.

While the 1964 tax cut has undoubtedly helped profits some, it is a minor reason for the upswing; so far, it has lowered corporate tax levels only 2%.

The fact is that, for the third successive year, profits for many U.S. corporations are increasing at a faster rate than sales. Among last week's headiest profit gainers: Chrysler, up nearly 50% on a 22% sales rise; Motorola, up 76% on an 11% gain in sales; American Airlines, up 86% on a revenue increase of 10%.

Coquettish Hovering. A main force behind the profit swell is U.S. industry's increasing use of excess capacity as the economy expands, a movement that gradually lowers production costs. Management also knows better than ever before how to wield the two most powerful tools in its possession: automation and cost control. A growing use of computers has made possible more exhaustive market research, closer control of inventories and production, and a greater awareness of a company's potential. Cost consciousness has become so strong in industry that businessmen are much readier than formerly to eliminate unprofitable parts of their business, and more reluctant to add to their labor force as business rises.

The giddy rise in profits is showing up on more than corporate balance sheets. Though the market has been coquettishly hovering around the 850 resistance level on the Dow-Jones average, having grown so used to good news that it has discounted much of it, 426 new company highs were registered last week v. only 58 new lows. Profits are also helping to fuel the record $44 billion capital expansion undertaken this year by U.S. industry and the $5 billion more it is spending on research and development. The most tangible impact is on the nation's 17.5 million stockholders. Last week the Commerce Department reported that cash dividends by corporations in June reached $2.5 billion--the highest monthly payout in the nation's history and an indication that dividends in 1964 will pass the $17.5 billion mark to set--as one might suspect--another alltime record.

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