The Commerce Department yesterday released strong figures for capital investment plans and housing starts, giving many analysts cause for optimism that the October stock market collapse will have few long-term effects on the economy.
A department survey indicated that U.S. industry plans to increase spending on new plants and facilities by 7.3 percent to about $420 billion in inflation-adjusted terms in 1988.
That would be about three times 1987's estimated real increase of 2.3 percent.
The housing figure was for new starts in November, the first full month after the stock market's precipitous Oct. 19 fall.
On an annual basis, it rose about 7 percent over October.
Economists welcomed the two reports. "Both suggest a resilient economy, with no signs of any stock market crash effects," said Allen Sinai, chief economist of the New York securities firm Shearson Lehman Bros.
Battered by foreign competition, many U.S. manufacturers have drastically cut capacity through layoffs and plant closings. Others have shifted production to overseas sites where costs are lower.
Recently, however, manufacturers in this country have increased their profits and exports. Many economists attribute the pickup in large degree to new price competitiveness in foreign markets because of the dollar's fall in the last two years.
In 1988, American manufacturers plan to step up capital investment to about $165 billion, an increase of more than 8 percent over anticipated expenditures in 1987, the Commerce Department survey found.
Companies are bumping up against their lowered capacity ceilings as sales increase, said Jerry Jasinowski, chief economist at the National Association of Manufacturers.
The planned investment, he said, "shows some of manufacturing's comeback and the desire to cut costs further."
Nonmanufacturing businesses also anticipated healthy growth, with plans to increase investment spending by almost 7 percent to about $260 billion.
Some economists cautioned that the overall 7.3 percent rise may not be achieved.
They noted that some of the survey respondents sent in their data before the stock market collapse and that the Commerce Department assumed zero inflation in the price of capital goods.
Still, with many experts expecting consumer spending to stagnate in 1988, evidence that investment spending would expand to take up the slack was welcome.
Housing starts, usually regarded as a general indicator of the strength of construction and related industries, rebounded strongly in November.
"It's another sign that the world hasn't collapsed after the stock market crash," said Lawrence Chimerine, chairman of the WEFA Group, a research institute in Bala Cynwyd, Pa.
Mark Obrinsky, an economist at the U.S. League of Savings Institutions, said that a bad showing for housing starts in October was due mainly to a rise in interest rates that month, not Wall Street's troubles.
Declining rates since then "have caused builders to respond favorably," he said.