U.S. Firms to Boost Overseas Spending 13%

U.S. companies plan to boost their overseas capital spending by 13% this year, up substantially from a 2% increase projected six months ago, the government said Thursday.

The Commerce Department said a survey conducted in December showed that majority-owned foreign affiliates of U.S. companies plan to spend $54.9 billion after increases of 14% in 1989 and 24% in 1988.

The increases over the three years are widespread by area and industry, the department said, reflecting parent companies’ growing emphasis on overseas operations.

Manufacturing affiliates said they plan a 17% boost to $27.4 billion in 1990, up from 2% in the previous survey last June. That compares to a 15% gain in 1989.

The department said all manufacturing industries plan increases.

“Manufacturers have been attracted by favorable conditions abroad, including increasing European economic integration and rapid economic growth in East Asia,” it continued.

The largest manufacturing increases were in primary and fabricated metals, non-electrical machinery and transportation equipment.

The boost in primary and fabricated metals is mainly for construction and expansion of aluminum smelters in Canada, the department said.

“In transportation equipment, European manufacturers of automobiles are expanding capacity in anticipation of market growth related to the 1992 single-market initiative of the European Communities,” it added. “That initiative is also encouraging spending in non-electrical machinery, particularly by European computer-manufacturing affiliates.”

The department said petroleum affiliates plan an 8% increase to $15.6 billion after boosting spending 9% in 1989. Those affiliates had said they planned a 6% boost in spending in the initial survey.

“Petroleum firms have been slowing their domestic capital spending for exploration and development and they have been shifting these activities overseas, partly in response to environmental concerns in the United States,” it reported.

In addition, petroleum spending “reflects rising world oil prices resulting from increasing worldwide demand and declining production in the United States and the Soviet Union.”

Affiliates in developed countries plan to increase expenditures 13% to $42.3 billion after a 10% gain in 1989.