Corporate Profits Up 3.9% in Quarter

Corporations reported a 3.9% rise in after-tax profits for the third quarter, down from an 8.9% surge in the previous quarter but substantially above the preliminary estimate last month, the government said Tuesday.

The Commerce Department said profits rose $6.4 billion to a seasonally adjusted annual level of $169.1 billion for the third quarter. That’s much better than the slight 0.2% rise reported a month ago, but the department noted that almost all of the improvement came from profits earned by overseas subsidiaries of U.S. companies.

The second-quarter rise in profits had been the best in nearly five years.

Bruce Steinberg, an economist with Merrill Lynch, said the domestic operations of many companies are being caught in a profit squeeze. They are paying higher wages and higher interest rates, but have been unable to pass on price increases to consumers because of stiff competition both in the United States and from overseas.

“We’re going to see some pressure on prices because profits are becoming harder to earn, but companies are probably limited by competitive pressures. . . . It will be hard for companies to reverse the kind of profit squeeze we’re starting to see,” he said.

Corporate profits before taxes rose 2.6% in the third quarter to $313.9 billion, after a 6.9% increase in the previous three-month period.

Dividend payments to stockholders rose 2.5% to $105.7 billion in the period, up from a 1.8% gain in the second quarter.

Corporate cash flows, a measure intended to show the funds corporations have available for investment, rose 0.8% in the third quarter, after a 1.4% rise in the April-June period.

Investment spending by manufacturing companies enjoying a boom in export sales has been one of the fastest-growing sectors of the economy. Reduced growth in corporate cash flows could eventually cut into capital spending expansion.