U.S. Firms Cut Spending Plans to 4.3% for ’92

WASHINGTON —  U.S. businesses cut back on already modest plans for investment spending this year, the government said Thursday in a report reflecting renewed pessimism about the economy’s prospects.

Businesses surveyed during July and August told the Commerce Department that they would spend $551 billion on new plants and equipment this year, a 4.3% increase from 1991.

In the previous survey, during April and May, businesses had planned a 4.7% increase. Before the year began, they had anticipated a 5.4% rise.

Meanwhile, a separate report from the Labor Department showed new claims for unemployment benefits rose slightly in late August for the second consecutive week. The increase of 8,000 claims to 394,000 during the week ended Aug. 29 reflected a stagnant job market, analysts said.

Business owners, who have seen their hopes for stronger economic growth dashed several times during the last year and a half, will remain cautious about new hiring and major investment until they see a sustained improvement in their sales, economists said.

A survey released earlier this week by the U.S. Chamber of Commerce showed that business executives’ confidence in the economy was at its lowest point in eight months.

“The fact is that manufacturers and businesses generally are still scared,” said economist David Wyss of DRI-McGraw Hill in Lexington, Mass. “They don’t see a big increase in demand coming. So, as a result, they are not anxious to hire and they are not anxious to do anything permanent and big investment is very permanent.”

The increase in investment spending this year, if realized, would follow a 0.8% decline in 1991, only the fourth drop in the last 33 years. Spending had risen a moderate 5% in 1990 after shooting up 11.4% in 1989 and 10.6% in 1988.

Economist Stephen S. Roach of Morgan Stanley & Co. in New York said he had expected an even greater reduction in investment plans, given the economy’s recent sluggishness.

“I take heart from the fact that businesses in 1992 are still planning a 4.3% increase,” Roach said. “Capital spending should play a key role in driving this economy during the next several years, and this survey is reasonably supportive of (the belief) that that’s what’s going to happen.”