The Situation: Your Ecomomics class is doing the analysis on how American economy keeps booming besides the fact that Asia nd Latin America are having economics problems.You are asked to write an essay for the class explaining what  American Economy stands in the world economy based on its present status, and also indicating the factors that made it happen.

Your Task: Write an essay for your Economics class about current American economy. Using relevant information form the text and graphs, discuss the factors that demostrate American econymic status and indicate the factors that made it happen.

Guidelines:
•Tell your audience what they need to know about factors that prove American economy surprisingly fit.
•Discuss the implications of those factors that made it happen
•Use specific, accurate, and relevant information from the text and graph to develop your discussion
•Use a tone and level of language appropriate for an essay for your Economics class.
•Organize your ideas in a logical and coherent manner
•Be sure to indicate any words taken directly from the article by using quotation marks or referring to the author
•Follow the conventions of standard written English

Note: Most students responses to this task failed to include more than a passing reference to the graphs, a situation that scorers attributed to the original wording of the task. Instead of limiting scores to Level 3 or below, scorers were directed to score responses for their treatment of the text. New tasks will follow the revised format used here, and students will be expected to integrate information from both sources in their response.

Just when it looked like it might cramp up, Corporate America has found a second wind in its profits marathon. Observers had fretted that economic problems in Asia and Latin America, combined with exhausted U.S. consumers, would cut short the eight-year run of U.S. earnings growth in the first quarter. But foreign economies appear to have stabilized, and consumers haven't yet worn out their plastic. That gave companies enough energy to sprint to their best earnings performance since 1997's first quarter.

The payoff was surprisingly sweet. Net profits rose 12% and operating profits 8% during the quarter for the 900 companies on BUSINESS WEEK'S Corporate Scoreboard, setting aside a huge, one-time fall at Ford Motor Co. (F). That's quite an improvement from the tepid 4% that Scoreboard companies eked out in 1998's first quarter and minus 2% for the whole year. Of course, adding in Ford's gain of $16 billion last year from the spin-off of Associates First Capital, its finance arm, changes things dramatically. It leaves Ford with a big earnings drop and turns this quarter's stellar Scoreboard gains into a 5% decline.

Top-line growth also was solid. Sales jumped 8%, the strongest increase since the fourth quarter of '97, as once-limping sectors like financial services, aerospace, and semiconductors came galloping back. Still, there was little confirmation in the profit numbers for Wall Street's recent enthusiasm for cyclical and smokestack stocks. Chemicals, machinery, and metals manufacturers all continued to suffer steep profit drops, reflecting sluggish overseas economies. While the stock price of Caterpillar Inc. (CAT), for instance, has climbed 41% since Apr. 1, first-quarter profits plunged 52%. Clearly, investors are betting that an earnings rebound is imminent. ''There's optimism in the market that the sectors will benefit from better conditions overseas,'' says Charles L. Hill, research director at First Call Corp.

OFFSHORE BLUES. How did so many companies squeeze out double-digit profit increases? For one thing, they rediscovered cost-cutting with a vengeance. Corporations, including some in telecommunications and banking, laid off workers with abandon starting last September. But in a booming economy, few stayed jobless for long. And almost no one stopped shopping. Consumer confidence has climbed 10% from its trough last summer, reflecting low unemployment, tame inflation, and a roaring stock market, the Conference Board says. That translates into robust consumer spending--up 6.7% in the first quarter, the fastest increase since the expansion began in 1991.

To see how companies have shaken the offshore blues, look at Citigroup. (C). The banking, insurance, and investment behemoth piled up the largest individual profit: $2.5 billion. That's up 15% from a year ago, and a huge improvement from last fall, when Russia's debt default creamed U.S. stock and bond markets. Citi, holding a chunk of Russian debt, was among those stung. But in 1999's first quarter, its profit from global corporate lending and investing rebounded 31%, while its Salomon Smith Barney (C) unit turned lush merger fees and trading gains into $648 million in profits, up 46%. Says Citi Co-Chairman John S. Reed: ''We were certainly helped by the fact that the world was [again] in relatively good shape.''

It also helped that the nation's largest exporter, Boeing Co. (BA), finally got a grip on its production problems. While still facing significant hurdles, including sharpened competition from Airbus Industrie, Boeing raised earnings ninefold, to $469 million, as it boosted jetliner output by almost a third. About half went to foreign carriers like Japan Airlines Co. (JAPNY) and Cathay Pacific Airways Ltd. (CPCAY).

Car companies were able largely to ignore weak sales in Europe and Latin America by revving up their U.S. sales of sport-utility vehicles, minivans, and pickup trucks. Consumers boosted purchases of the gas-guzzling brutes by 14% in the quarter. As a result, General Motors Corp. (GM) rang up a 33% earnings gain, to $1.8 billion, while Ford's profits rose 17%, to $2 billion, excluding the one-time gain from the Associates' deal.

Microsoft Corp. (MSFT) also scored big, with profits surging 43%, to $1.9 billion. Its 15% sales growth was lower than usual, hurt by the much-delayed shipment of Windows 2000 and a reluctance by companies to install new technology until they've licked the Year 2000 bug. But by tightening its belt, Microsoft raised its already phenomenal margins to 44%, from 35%.

Semiconductor companies continued to rally from a dismal 1998. Industry leader Intel Corp. (INTC) raised profits 57%, to $2 billion, off a bleak year-earlier quarter. The profit gain reflected improved manufacturing efficiencies. But revenue growth, usually around 30%, slowed to 18%, and analysts worry that with PC prices dropping, Intel won't soon recover its old pace.

PRICING SQUEEZE. For some industries, there was no escaping the overseas pricing squeeze. Oil companies were hit hard, as crude prices slumped to an average $13.17 a barrel in the first quarter, the lowest since 1983. OPEC's latest promise to cut production didn't come in time for industry leader Exxon Corp. (XON), whose profits plunged 46%, to $1 billion, on sales of $26.9 billion, which were down 10%.

It wasn't the export market that hurt the metals industry as much as cheap imports. Russian and Brazilian steelmakers, which once sold to a booming Asia, have diverted goods to the U.S. Even though federal officials curtailed the influx with antidumping strictures, steel buyers are working through bulging inventories. That translated into a $9 million loss at USX Corp. (X) and a $26 million loss at Bethlehem Steel Corp. (BS).

The biggest dollar loser, Sprint PCS (FON), didn't suffer from marketplace problems. Sales nearly tripled, but the cellular arm of Sprint Corp. is spending so heavily to enlarge its phone network that it lost $605 million. Sprint PCS execs, of course, consider that an investment in the future.

If the bet pays off, the company may soon join the long-running corporate earnings celebration. But the question remains: How long can the good times last? A survey of analysts by First Call projects a 17.1% hike in operating profits for 1999. Energy prices and interest rates are on the rise, though, and overseas economies remain shaky. Corporate America has proven to be surprisingly fit. But no one can sprint forever.

By Larry Light, with Gary Silverman in New York, Andy Reinhardt in San Mateo, Calif., and Roger O. Crockett in Chicago

Graph

AEROSPACE & DEFENSE        95%                       ENTERTAINMENT             -86%
TELECOMMUNICATIONS         86                        NONFERROUS METALS         -86
SEMICONDUCTORS             63                             STEEL                     -82
APPAREL                    54                                    CARS & TRUCKS             -79
COMPUTERS & PERIPHERALS    54                    TIRE & RUBBER             -76
POLLUTION CONTROL          46                          PETROLEUM SERVICES        -68
CONSTRUCTION/REAL ESTATE   45                    CONSTRUCTION & ENG.       -61
RAILROADS                  40                                    PAPER CONTAINERS          -61
TRANSPORTATION SERVICES    37                    COAL, OIL, & GAS          -44
TOBACCO                    34                                    SPECIAL MACHINERY         -31
COMPUTER SOFTWARE          32                        FOOD RETAILING            -29
BANKS-EAST                 32                                        AIRLINES                  -28
TELEPHONE COMPANIES        28                        GENERAL MANUFACTURING     -18
BANKS-MIDWEST              28                            CHEMICALS                 -14
AUTO PARTS                 26                                    GLASS CONTAINERS          -11

ALL-INDUSTRY AVERAGE: -5% 

WHO MADE THE MOST                                             WHO LOST THE MOST
(in millions of dollars)                                                      (in millions of dollars)

CITIGROUP            $2,489                                           SPRINT PCS GROUP            -$605
GENERAL ELECTRIC      2,155                                       NEXTEL COMMUNICATIONS        -439
INTEL                 1,999                                                   METRO-GOLDWYN-MAYER          -307
FORD MOTOR            1,979                                           SONAT                        -212
MICROSOFT*            1,917                                            RELIANT ENERGY               -210
BANK OF AMERICA       1,914                                         PEOPLESOFT                   -171
GENERAL MOTORS        1,820                                        TENNECO                      -150
PHILIP MORRIS         1,787                                              INACOM                       -148
WAL-MART STORES**     1,559                                      ADVANCED MICRO DEVICES       -128
IBM                   1,470                                                       DOMINION RESOURCES           -116
MERCK                 1,300                                                   WESTERN DIGITAL*             -114
AIG                   1,199                                                        MEDIAONE GROUP               -111
CHASE MANHATTAN       1,173                                       BRADLEES**                    -99
BANK ONE              1,151                                                 PENN TRAFFIC**                -94
BELL ATLANTIC         1,142                                              SMURFIT-STONE CONTAINER       -92
 

* FISCAL THIRD QUARTER   ** FISCAL FOURTH QUARTER

DATA: STANDARD & POOR'S COMPUSTAT, A DIVISION OF THE MCGRAW-HILL COMPANIES