The Outlook: Capital Spending May Spur Recovery
NEW YORK -- While new commercial and factory construction is likely to remain weak, companies will continue to spend heavily on machinery and equipment. Spending increased sharply in the fourth quarter of last year, helping to account for the strong rise in gross domestic product.</br></br>Smith Barney, Harris Upham & Co. estimates business fixed investment in inflation-adjusted terms will soar 9.3% this year, a gain that the firm thinks will help spur the economy to a moderate rise.</br></br>The consensus forecast is that inflation-adjusted GDP, the nation's output of goods and services, will grow 3.3% this year. Aside from capital outlays, the factors expected to keep the economy edging upward are residential construction, inventory increases and, to a modest extent, state and local government spending.</br></br>The proposed temporary investment tax credit for large companies and the permanent one for smaller companies are under attack in Congress as tax loopholes that even industry doesn't want. Jerry Jasinowski, president of the National Association of Manufacturers, says the credits would merely move spending forward. Spending, in any case, is rising without them.</br></br>In the latest Dun & Bradstreet survey of 5,000 manufacturing firms, 44% of all companies foresee increases in outlays during 1993. Another 17% expect to have lower expenditures, while the remaining 39% see outlays remaining constant at 1992 levels.