U.S. firms plan to cut capital spending next year.

According to a survey by McGraw-Hill Economics, U.S. firms will cut spending by 5.4% after inflation, a prediction that portends tough times for businesses. “The latest McGraw-Hill survey of business investment plans is flashing a warning signal for the U.S. economy in 1986,” the company said. Before inflation, the companies said they expect to trim capital outlays to $380.7 billion in 1986, a 1% decline from this year’s estimated level of $384.4 billion, McGraw-Hill said. Rising prices will eat up 4.7% of anticipated outlays next year, producing the “real,” or inflation-adjusted, drop in spending of 5.4%.