1st-Quarter Profits Surge 16% on Booming Economy

U.S. companies’ first-quarter profits rose 16%, the biggest increase in years, as the six-year economic expansion buoyed aerospace, autos, oil and other traditional industries.

With 429 companies in the Standard & Poor’s 500 reporting as of Thursday, the increase is more than double the 7.8% in last year’s first quarter and beats even the 14% earnings boost in the final quarter of 1996.

Almost everything fell into place as the economy surged, personal spending accelerated and mild weather in much of the country made travel and shopping easier.

Growth was led by General Motors Corp., USX-U.S. Steel Group Inc., Boeing Co., Walt Disney Co. and Delta Air Lines Inc., which all more than doubled their profits from operations. Rockwell International Corp., Exxon Corp., Hilton Hotels Corp. and Time Warner Inc. racked up gains of at least 20%.

“It’s a blowout quarter--much better than we expected,” said Ronald Hill, investment strategist at Brown Bros. Harriman & Co. in New York.

It’s the 13th quarter in a row in which more than half of the S&P; 500 has beat earnings expectations. But it could be the last time that happens for a while. Economists and analysts see signs that the economy is cooling, including a drop in durable-goods orders and higher costs to borrow the money they need to expand.

Perhaps the biggest concern is rising labor costs, which can accelerate inflation. The employment cost index--the broadest measure of wage, salary and benefit costs--rose 2.9% in the 12 months through March, up from 2.8% the previous year.

In the first quarter, though, economic expansion was going strong. The Commerce Department said this week that gross domestic product rose 5.6%, up from 3.8% in the fourth quarter and the largest gain in a decade.

“What we’re seeing is a very dynamic economy,” fueled by consumer spending and helped by mild weather in February, said Scott Brown, chief economist of Raymond, James & Co.

The profit growth also comes from companies’ persistent efforts to cut costs and boost productivity. In many cases, those steps offset the effect a robust U.S. dollar had on reducing the value of overseas revenues.