Firms Say They’ll Spend 8.3% More in ’94 : Economy: Corporate expansion plans bode well for a continuing recovery. But the picture isn’t so rosy in California.

The Commerce Department said Thursday that American companies plan to spend a robust 8.3% more this year to modernize and expand their businesses, raising hopes that the nation’s economic revival will continue well into 1995.

But at the same time, the report indicated that Southern California’s short-term economic outlook remains less optimistic. While spending in a variety of industries that dominate the economies of other states--from auto making in Michigan to mining in West Virginia--will soar this year, spending within California’s key aircraft business will fall another 15%.

“California’s economy is still moving ahead, but it will remain closer to the caboose than it is to the engine,” said Adrian Sanchez, regional economist at First Interstate Bank in Los Angeles. “Things are getting better here, but we’re still playing catch-up with the rest of the nation.”

The government’s forecast that businesses nationwide will spend a healthy 8.3% more on new equipment and expansion in 1994 than they did last year surprised some analysts, who thought the recent rise in interest rates might force many companies to abandon such plans.

Indeed, the four-month run-up in rates may have prompted some firms to scuttle planned improvements.

After adjusting for inflation, Thursday’s growth estimate is below the 9.8% spending increase that the Commerce Department forecast after taking its winter survey several months ago.

But the 8.3% the department now expects in 1994 would still be the largest in five years, and could provide the fuel needed to keep the expansion rolling well into next year.

The 5,000 U.S. businesses surveyed by the government in April and May said they will spend $634 billion this year, up from $586 billion in 1993.

“Spending by consumers has been tapering off, but it looks like businesses may be stepping in to pick up some of the slack,” said Robert Barr, deputy economist at the U.S. Chamber of Commerce in Washington.

Spending by businesses has a domino effect on the entire economy and accounts for about one-third of all economic growth. When a company places an order for a new piece of equipment, it creates new business for the firm that must fulfill the order, which then must order more material from yet another company.

The big jump in corporate spending will be led by the automotive industry, where company executives expect to spend 28.3% more on new equipment and plants than they did in 1993.

Companies in the smaller steel industry will spend 37.5% more, while those in the electrical machinery business expect a 12.1% increase, and mining companies see a 7.1% jump.