SPENDING GROWTH TO SLOW.Byline: Richard W. Stevenson The New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Times U.S. businesses plan to spend only slightly more this year than in 1995 on new buildings and equipment, marking a sharp slowdown in an important sector of the economy, a survey released Thursday by the Commerce Department said. Overall economic growth has depended heavily in the past several years on capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. by business, and economists said Thursday's figures were more evidence that growth this year would be anemic. The Commerce Department's Investment Plans Survey estimated that businesses would spend about 1.5 percent more this year on capital goods Capital Goods Any goods used by an organization to produce other goods. Notes: Examples of capital goods include office buildings, equipment, and machinery. See also: Capital Expenditure, Disinvestment Capital goods , which are primarily buildings, machinery and other equipment. But the spending figures collected in the survey are not adjusted for inflation, meaning that the small percentage increase in planned expenditures this year could actually translate into less building and equipment acquisition than last year. If the spending estimate proves correct, it would be the lowest growth recorded in capital spending since the recession in 1991, and it would be a steep falloff fall·off n. A reduction or decrease: a falloff in car sales. Noun 1. falloff - a noticeable deterioration in performance or quality; "the team went into a slump"; "a gradual slack in from last year's growth rate of 8.1 percent. ``We've had a boom in plant and equipment spending in the past several years,'' said Paul L. Kasriel, the chief domestic economist at Northern Trust Co. in Chicago. ``That has added a lot of capacity to the economy at the same time that demand has slowed down. As a result, businesses do not believe they need to add a lot of capacity.'' The overall numbers masked broad differences in spending plans among different types of businesses. Manufacturers, which account for 30.6 percent of the planned spending, said they expected to spend 7.2 percent more on plant and equipment this year than last year, with the durable goods durable goods Goods, such as appliances and automobiles, that have a useful life over a number of periods. Firms that produce durable goods are often subject to wide fluctuations in sales and profits. Also called consumer durables. sector up 10 percent this year. Economists said the figures appeared to reflect in part the continued strength of export growth for manufactured goods manufactured goods npl → manufacturas fpl; bienes mpl manufacturados manufactured goods npl → produits manufacturés , particularly such capital goods as machinery being bought by foreign companies. Retailers and wholesalers, however, plan a cutback cut·back n. 1. A decrease; a curtailment: "The political effects of food cutbacks could be devastating" New York Times. 2. in spending of 4 percent, in what economists said was a sign of weak consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. and overbuilding of stores. Growth in capital investment has far outstripped growth in consumer spending since the economy started rebounding in 1992, and while Thursday's figures were not a surprise to economists, they served as the latest confirmation that the nation's output this year would expand, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. various projections, by well under 2 percent. ``We don't see a recession,'' said Kasriel, ``but clearly one of the main engines of growth is shifting into a lower gear.'' Some economists said the lower rate of investment growth came not just from corporate decisions about capacity, but from their growing concern about their bottom lines. ``Capital spending plans usually turn weak when profits start to get squeezed,'' said Edward Yardeni, an economist at Deutsche Morgan Grenfell/C.J. Lawrence in New York. ``Profits should be down 5 to 10 percent this year, so it's not surprising that companies are cutting back plans for purchasing new plants and equipment.'' The Commerce Department survey found that companies plan to spend $603.4 billion for capital goods this year, up from $594.5 billion last year and $549.9 billion in 1994. But, again, the figures have not been adjusted for inflation. The survey got responses from more than 20,000 companies, which were questioned in November about their capital spending for last year and their plans for this year. ``Businesses will continue to invest, especially in equipment, to increase the efficiency of their operations,'' Kasriel said. ``They feel they can handle without much problem the anticipated order growth, but it's still an extremely competitive business environment, and they feel the need to produce that given amount of goods at a lower price.'' CAPTION(S): Chart: Smaller Plans For Spending American companies plan to increas e their investment spending slightly this year, according to a Government survey of 30,000 businesses on their spending plans for depreciable depreciable Of, relating to, or being a long-term tangible asset that is subject to depreciation. capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) like buildings, structures, machinery and other equipment. |
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