If corporate profits are any indication, the economy is on a tear. Thanks to a happy collision of low interest rates, tax cuts, and an export-boosting weak dollar, U.S. companies posted the strongest quarterly profit growth since 1993. BusinessWeek's flash profit survey of 78 early-filing companies shows that fourth-quarter income from continuing operations before extraordinary items rose a robust 47% on an 11% sales increase. Tech was the big winner: Profits soared 225%, thanks partly to consumers' appetite for laptops and cell phones. Financial services also shined -- profits grew 67% on continued strength in mortgages and other consumer lending.
With only a small sampling reporting, those heady numbers could well be revised down as a fuller profit picture emerges over the next few weeks. Still, this was a stellar quarter. Analysts surveyed by Thomson First Call are projecting a 27.5% jump in fourth-quarter profits overall for the Standard & Poor's 500-stock index, on sales gains of nearly 10%. For all of 2003, profits at S&P companies are expected to rise 17%.
One reason for the big gains: Even as sales growth gained momentum, companies were conserving cash and cutting costs. Texas Instruments Inc. (TXN), which lost $589 million the previous year, posted a $512 million profit on strong demand for broadband gear and high-definition TVs. Citigroup's (C) profits soared 96% as consumer and investment banking income climbed and bad loans fell. Those sorts of numbers could be hard to repeat as companies step up their own capital spending after years on the sidelines. Still, with the economy gathering steam, the profit outlook remains bright. By Stanley Holmes in Seattle