U.S. Firms to Cut Overseas Spending Pace
U.S. companies plan to boost capital investment in their overseas subsidiaries by just 2.5% in 1986, far below the 15% increase expected for this year, the government reported Friday.
The Commerce Department said a survey found that American businesses expected to spend $39.9 billion on expansion and modernization at their overseas subsidiaries in 1985 and $40.9 billion next year. That compares to actual spending in 1984 of $34.7 billion.
Department analysts said the big increase being projected for this year is coming because of declining interest rates and the moderate economic recovery under way overseas. But they cautioned that the actual gain is likely to fall short of industry projections based on past experience.
Even if the gain is realized, spending by U.S. companies overseas would still be below levels set from 1980 through 1982.
3% Rise by Oil Industry
The small increase in spending expected for 1986 “may partly reflect investors’ uncertainty about the future pace of the business recovery abroad and the foreign currency value of the dollar,” the report said.
The petroleum industry plans to increase overseas spending by 3% in 1986 to $17.2 billion, following a projected 18% increase this year. But spending will still be below the 1982 level because of the worldwide oil glut and weak prices of recent years, the government said.
The manufacturing industry plans to increase spending on capital investment at overseas plants by 1% in 1986 to $16.5 billion, after a projected 16% increase this year.
In 1985, all industries except primary and fabricated metals planned increases. But for 1986, only the chemical and non-electrical machinery industries are projecting increases in foreign spending plans.
In other industries, U.S. companies plan a 3% increase in 1986 to $7.3 billion after a 7% projected gain this year. The biggest increase in this catch-all category is in mining, where spending is expected to go up 19% in 1986 following an expected 24% rise this year.
