The official numbers won't be out for another 10 days, but administration economies are bracing themselves for another does of bad news; soaring corporate profits.
The profits report comes just as Alfred Kahn, chairman of the Council on Wage and Price Stability, is building a case that some corporations are not complying with the adminstration's tandard for price increases. Therefore, while the profits report may be good for the economy it could be politically disastrous for the White House.
Some analysts say pre-tax corporate profits may have risen at more than a 35 percnet annual rate last quarter.
One adiminstration economist, while citing no figure, said the number will be "relatively sensational." Kahn himself complained this week that profits will be "troublesomely good."
Sensational news about profits is hardly what the doctor ordered for an administration trying to convince labor to accept 7 percent wage hikes in the face of 9 percent inflation rates. The teamsters union this week demanded an estimated 14 percent first year wage increase in its new national trucking contract.
"how on earth can you keep labor on the reservation when they see these profit numbers," worries a Carter adviser. "It is a tough situatin."
Moreover, the biggest gains in profits are being reported by industries in which prices have been rising rapidly -- oil, steel, aluminum, timbre, for example -- even though Kahn's COWPS insists that virtually all the largest corporations are in compliance with the voluntary price standards.
One White House official said he expects that fewer that five companies out of the top 500 industrial corporations in terms of sales would be found to be violating the standard. Generally, companies are expected to keep their average price increases at least one-half a percentage below their average for 1976 and 1977.
Profit margins surged in the fourth quarter as business operated plants closer to capacity. The entire economy grew at a 6.1 percent annual rate in the quarter, and that surge in demand led directly to both higher margins and much larger total profits.
Compared to the fourth quarter of 1977, pre-tax profits were probably up at least 25 percent. After-tax, the year-over-year gains were probably just about as large, analysts say.
Compounding the administration's problem with labor, indications are that the year-over-year profit comparison for the current quarter, when they become available in May, will show even greater increases in percentage terms.
The very high level of profits also is creating another difficulty for administration policy makers not related to the wage-price standards. The profits are adding greatly to the availability of ready cash at a time the administration and the Federal Reserve are trying to restrain the growth of credit.
Corporations with cash in excess of their own immediate needs routinely may loan it directly to another corporation that needs to borrow. In exchange, the lender takes back an I.O.U. from the borrower called corporate paper.
The problem with this process, from the administration's point of view, is that it operates entirely outside normal banking channels and thus is not subject to the Fed's attempts to control bank lending.
"We are worried that the economy is still moving too fast," said an administration economist. "The combination of capacity pressures and high profits is going to mean more corporate spending for new plant and equipment.
"The money from those profits is going to burn a hole in corporate treasurers' pockets," he continued. "They have no commitments but they do have the cash flow."
In addition to oil, steel, aluminum and timber, other industries with major gains in the fourth quarter include chemicals, business equipment, some consumer goods, banks and communications.
American Telephone & Telegraph Co., which earned $1,356 million in the fourth quarter, asked the Federal Communications Commission yesterday to increase its allowed rate of return on interstate operations from a maximum of 10 percent to 10.38 percent immediately and to a maximum of 12 percent in the future. The alternative might be an order to reduce long distance telephone rates.