U.S. Firms Plan 9.4% Rise in Capital Spending

U.S. companies have raised the amount they are spending on factories and new machinery this year, the Commerce Department said Friday, ensuring that a key element of the economic expansion remains in place.

Companies in all lines of business, from autos to food processors, intend to ratchet up 1995 capital spending by 9.4% to $600.74 billion, instead of the 6.6% increase they planned at the end of 1994.

The estimate is based on a survey sent to 30,000 companies in the second quarter, when the economy had slipped into lower gear.

While the results show 1995 capital spending increase will come in below 1994’s revised 12.1% rise, analysts said it still represents hearty plans for new investment this year.

Vigorous spending to expand factories and add sophisticated machinery and computers not only benefits the economy, but also makes industry more competitive in foreign markets.

“The business sector really is carrying the economy on its back,” said Robert Dederick, economic consultant to Northern Trust Co. in Chicago.

“It is encouraging that they continue to have aggressive spending plans, given that manufacturing activity declined in the first half with sales down and inventories rising,” he said.

The latest survey indicates manufacturers will spend 26.1% more on new investments in 1995, for a total of $181.83 billion, stronger than the 20.2% increase they indicated in the preceding survey.

By comparison, it means manufacturing companies will be raising their capital spending by nearly three times the 7.5% increase they invested in 1994.

Makers of durable goods, everything from cars to computers, expect to spend $100.59 billion in 1995--32% more than they did in 1994, a revision upward from the 28% increase they previously planned.