U.S. Firms Plan Only 1.4% Rise in ’87 Spending

U.S. businesses plan to increase investment spending a modest 1.4% this year, even weaker growth than previously believed, the government reported Thursday.

The Commerce Department estimated that spending by businesses for expansion and modernization will total $387.9 billion for all of 1987, after removing the effects of inflation.

The new estimate for spending this year is based on an industry survey completed in August. It represents a downward revision from a May survey that showed businesses planning to boost investment in new plants and equipment by 2.8% this year.

The downward revision came from cutbacks in spending in non-manufacturing industries, which offset stronger increases in manufacturing.

The projected 1.4% spending increase would follow an actual decline of 2.6% in spending during 1986.

The 1986 decline in business investment was the first setback since 1983, when spending had declined 1.1% following an even bigger 7.9% drop in 1982, during the depths of the last recession.

The small increase in business spending for 1987 is in line with the forecasts of many private economists, who believe that the new tax law will depress business investment this year.

The 1987 increase, if realized, would be the first advance since 1985, when business investment climbed 9.6% following an even bigger 16.6% jump in 1984 as American industry recovered from the 1981-82 recession.

Manufacturing industries plan a 2.6% increase in spending this year, with strength coming from gains in investment at steel blast furnaces and factories making electrical machinery.

Non-manufacturing industries plan to boost investment spending by 2.5% this year despite declines planned by electric utilities, railroads and the mining industry.