Business Investments to Rise, at Slow Rate

American businesses plan to boost spending on plants and equipment 5.5% in 1990, the slowest increase in three years, the government said today in a report reflecting continued economic sluggishness.

The Commerce Department said a survey conducted in April and May found businesses planning to spend $500.4 billion for expansion and modernization this year, the fourth consecutive year of increased business investment spending.

If realized, the investment spending would top the record $474.3 billion in capital expenditures set last year, although the growth rate would be the slowest in three years.

Capital spending rose 8.9% in 1989, 9.4% in 1988 and 4.2% in 1987.

The new estimate is down from the 7.9% spending increase that businesses said they planned in the previous survey completed in March. A survey completed in November indicated businesses planned to boost spending by 4.9% this year.

The economy has been growing sluggishly for more than six months due to Federal Reserve efforts to stem inflation by tightening credit.

The Commerce Department said the gross national product--the nation’s broadest measure of economic health--grew at a 1.3% annual rate in the first quarter after an even weaker 1.1% rate in the final three months of 1989.

Economic activity was moving along at a 3% annual rate in the third quarter of last year and ended the year up 3% following a 4.4% gain in 1988.

Any growth in business spending would help stimulate the economy, now in its eighth year of expansion, and pick up some of the slack from diminished consumer spending.

In addition, spending for business investment to replace aging plants and equipment and expand facilities helps to boost U.S. productivity, an increasingly important factor in view of the stiff competition the nation faces from overseas.