U.S. businesses plan to increase their spending for new plant and equipment by a disappointing 3 per cent in real dollar terms in 1973, according to a survey released today by the economic department of McGraw-Hill Publications Co.
The 3 per cent rise would be a decline from the 7 per cent gain in capital spending estimated for 1977, and is considered insufficient to keep the U.S. economy advancing at a 4 per cent real growth rate that is now the conscensus forecast among economists for next year.
It is also well below the 3 to 10 per cent real rate of increase in capital spending that President Carter's economic advisers have said is necessary to achieve goals of significantly lower unemployment and a balanced budget by 1981.
Businesses are likely to remain cautious because there is still a great deal of uncertaintly about major legislation, including the energy proposals and tax reforms. McGraw-Hill, vice president and chief economist, Douglas Greenwald, said in explaining the survey results.
He added that if business conditions improve, businesses and be expected to increase the actual level of their outlays next year but will do the opposite if it looks like economic activity is continuing to slow.
This preliminary survey was taken over the last two months, and Greenwald said that the later the results came in, the more companies said they were planning to increase their plant and equipment spending.
The Commerce Department's first survey on how much businesses will spend on capital goods in 1978 will not be out until next January.
The McGraw-Hill report puts 1978 capital spending at $153.11 billion, up 11 per cent in dollar terms from 1977. But after adjusting for a projected 3 per cent inflation rate in capital goods prices next year, the real increase comes to only 3 per cent.
Of 25 industry groups sruveyed, the petroleum industry is the only one to show no planned increase in its capital spending next year.
This freeze goes a long way toward explaining the rapid overall advance projected for capital outlays, because the oil companies represent the single largest industry expenditure - $14.14 million this year and exactly the same on 1976 - and in the past they have increased their spending on plant and equipment substantially faster than the average.
According to the survey both manufacturing and nonmanufacturing - industries will increase capital spending at the same rate to 11 per cent - in 1973, with manufacturers expenditures jumping from $61.54 billion to $68.30 billion, and nonmanufacturing industries' expenditures climbing to $84.81 billion from $76.26 billion.