Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, April 9, 1993 TAG: 9304090202
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
BUSINESSES PLAN MORE INVESTMENT
Low interest rates and high profits are prompting American businesses to boost their plans for investing in buildings and equipment.Firms surveyed during the first quarter said they would spend $582 billion in 1993, up 6.6 percent from last year and, if realized, the biggest increase in four years, the Commerce Department said Thursday.
By contrast, business investment rose 3.3 percent in 1992 and dropped 0.8 percent in 1991, a recession year.
Commerce Secretary Ron Brown urged Congress to enact President Clinton's proposed investment tax credits, now bottled up in the Senate, "to reinforce the private sector's planned increase in capital spending."
However, economists said the credits - one temporary and applying to businesses generally and one permanent and targeted at small businesses - will have at most a marginal effect.
"Most of the reason capital spending is going up is the fact that long-term interest rates are quite low and there's a drive in corporate America to become more productive," said economist Bruce Steinberg of Merrill Lynch in New York.
"Businesses have not been sitting on their profit gains. They've been putting them to work. They haven't been hiring people, but they have been buying equipment and that's been a significant support to the expansion,' said economist Robert G. Dederick of Northern Trust Co. in Chicago.
The 1993 increase of 6.6 percent would be the largest since investment spending shot up by 11.4 percent in 1989. The latest figure was an improvement over a survey three months earlier, when firms said they planned a 5.3 percent increase.
Manufacturers overall planned a 5.4 percent increase in investment. Companies making durable goods - big-ticket items expected to last three or more years - plan a 5 percent spending rise. However, aircraft manufacturers expect a 27.3 percent drop.
Nondurable goods manufacturers project a 5.7 percent increase, while nonmanufacturing companies plan a 7.2 percent rise.
Among the industries with the most optimistic plans are: stone, clay and glass, up 27.7 percent; auto manufacturing, 21.5 percent; electrical utilities, 11 percent; chemicals, 9.1 percent; electrical machinery, 8.9 percent; railroads, 8.6 percent; and textiles, 8 percent.