Profits of U.S. corporations edged down slightly in the second quarter after plummeting in the first three months of the year, the government reported yesterday.
The government also confirmed preliminary estimates of a slight increase in the nation's output in the second quarter, seen by economists as a further indication that the recession is at or near bottom although a recovery has yet to materialize.
There was a wide difference between profits of financial corporations, which rose sharply in the second quarter, and those of non-financial companies, which continued to fall.
The latest economic data for the second quarter suggest "we are in a prolonged bottoming-out process and that the worst is over," said Allen Sinai, chief economist for Data Resources Inc. in Cambridge, Mass. "We no longer have a free-falling economy."
"The numbers are consistent with the bottoming-out thesis," said Theodore Torda, a senior economist at the Commerce Department. "But there is nothing in this report that convinces me that a recovery is underway."
Most forecasters, who previously predicted a recovery would begin by spring or summer, now expect the economy to stage a slow, weak recovery by historic standards during the early or late fall. They say the recent drop in interest rates, which have choked the economy for the past year, improves the outlook for a recovery.
In a revised report, the Commerce Department said inflation-adjusted gross national product -- the broadest measure of economic activity -- rose at a weak annual rate of 1.3 percent during the second quarter, but that was a big improvement from the sharp fall during the prior six months.
A month ago, the department had estimated that "real" GNP grew at a 1.7 percent annual rate. An unexpected plunge in economic activity during June contributed to the smaller growth figure reported yesterday.
Commerce officials said personal consumer spending grew less than initially estimated and business capital investments fell by even more than had been reported. In addition, business inventories were trimmed at a slower pace than previously reported.
The department reported that before-tax corporate profits fell 1.7 percent from the first quarter to an annual rate of $168.7 billion. After-tax profits fell 0.8 percent to $115 billion.
Before-tax profits during the first quarter had plunged 20.7 percent from the last quarter of 1981, the second steepest decline on record.
Financial corporations managed to show a robust profit gain of 17.6 percent on an annual basis during the second quarter, while other companies registered a 4.5 percent drop.
Corporate profits have been sliding for three consecutive years, and are now down more than 30 percent from 1979.
The department also said inflation -- as measured by the GNP implicit price deflator -- rose at an annual rate of 4.9 percent during the second quarter, up from 4.3 percent in the first quarter. The initial report had estimated the second-quarter inflation rate at 5.3 percent.
Total GNP, which measures that value of all goods and services traded in the economy, rose to an annual rate of $1.475 trillion, after eliminating gains attributed solely to inflation.
Before the inflation adjustment, the total GNP was $3.041 trillion on an annual basis, the government said.
The smaller rise in the revised GNP report was attributed in part to a smaller gain in consumer spending, which has remained the strongest sector of the economy throughout the recession and is being counted on to pace the recovery. The revised report said inflation-adjusted personal consumption spending during the second quarter rose at an annual rate of $4.7 billion from the first quarter, not $7.2 billion as reported last month.
Business investment, which has been sorely depressed throughout the recession, fell even more than first estimated. Capital spending adjusted for inflation declined at an annual rate of $5.6 billion during the second quarter, not $3.8 billion, as previously estimated.