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Show li I "f'"'r"i" ' CAPITAL SPENDLNG PROSPECTS STILL DIM During the earlier days of the recession many economic observers were hopeful that business outlays for new plants and equipment would soon be instrumental in reversing the downturn. This development, however, did not come about, and business planning has been indeed slow to reveal any pattern of rising expenditures. A Commerce Department survey made in the latter part of January and February indicated that business intended to reduce spending for plant and equipment by 1 percent during the course of 1982, after adjustment for inflation. In late November and December of last year a decline of 0.5 percent in business outlays was predicted for the current year. Instead of improving as 1982 has moved along, the outlook for this segment of the economy has grown less encouraging. The most recent survey made by the Commerce Department in the latter part of April and the month of May revealed that companies 'as a whole intend to spend 2.4 percent less on new capacity and equipment during 1982 than was the case for the twelve months before. This was, of course, also after adjustment for inflation. So, the trend in expenditures of this type planned by companies thoughout the nation is still on the downward path, continuing the weakness of the past sixth months. WEIGHING SPENDING MORE CLOSELY During 1981 as a whole capital spending reached a total of $321.5 billion, representing an increase of 8.7 percent from the previous year. But here again inflation served as a culprit, and the advance was virtually nonexistent after the price gains were taken into consideration. Commerce Secretary Malcolm Baldrige declared that the drop in business spending plans was attributable largely to the persistently high interest rates, which were without question aggravated by the inability or unwillingness of Congress to come to an agreement on the details of the federal budget. Secretary Baldrige did try to generate a degree of optimism by pointing out that the anticipated 2.4 percent reduction in capital outlays for the present annum was far less dramatic than the 11 percent plunge seen during the recession of 1975. He did pin the difference, however, on the fact that there were several tax breaks put through last year to stimulate business investment. ' CONSUMER SPENDING MUST COME FIRST Quite a number of leading businessmen are of the opinion that capital expenditures will not reflect any real pickup until consumer spending becomes clearly more brisk. A forecasting authority at Data Resources in Massachusetts says that the sag in the Commerce Department survey figures is a definite signal that even the biggest, well-off corporations are not ready to lay out funds for new plant and equipment until the consumers of the nation have shown that they are willing and ready to buy. Another economist in Pennsylvania agrees that capital spending will have little upward impact on the economy until retail buying shows a real improvement. A good many business observers think consumer spending may do better after the 10 percent cut in personal income tax rates becomes effective July 1. Without regard to the effect of inflation, it is expected that nonfarm businesses will lay out a total of some $328.6 billion compared with the dollar volume of $321.5 billion for 1981. This is indicated in the latest report and the 1982 figure it reveals is substantially lower than that projected in the survey of three months before. Manufacturers have plotted capital expenditures (ex inflation) only 0.4 percent greater than in 1981 versus a 9.5 percent advance last year over the year before. So, while capital outlays will be considerable this year, they will not take any impressive steps toward higher ground until the country's manufacturers and service companies are convinced that consumers are truly getting ready to buy heavily. |