More firms expect to increase capital spending in 1989 than in any year since 1986, according to Dun & Bradstreet Corp.'s latest Dun's 5,000 Survey.
Capital spending plans are strong for 1989, with more than 46 percent of the 5,000 U.S. firms surveyed planning to increase their capital spending this year, up from 41 percent in 1988 and 33 percent in 1987."The continued strength in capital spending reflects the strength of the economy, which continues to benefit from a strong export market," said Joseph W. Duncan, D&B's corporate economist. "To keep pace with the growing export market for U.S. goods and services, U.S. businesses are continuing to increase investments to modernize and expand productivity."
The survey, conducted last November, indicated 46 percent of the firms plan to increase spending in 1989, while 22 percent plan to decrease spending and 32 percent expect to maintain spending at 1988 levels. While the percentage of firms expecting to decrease spending in 1989 was unchanged from last year's survey, the number of firms projecting no change dropped to 32 percent in 1989 from 37 percent in 1988.
"A year ago, many smaller firms, fearing a recession tied to the stock market plunge, were cautious about making capital investments. But the business climate showed unexpected strength throughout 1988 and now these firms are adjusting their spending upwards," said Duncan.
The percentage of firms expecting increases in capital outlays in 1989 was fairly uniform across all industry sectors, ranging from 31 percent to 57 percent.
Duncan noted that 50 percent of U.S. manufacturing firms, which have benefited from the boom in exports, plan to increase capital spending in 1989. These investments, according to the survey results, are earmarked for productivity improvements and capacity expansion.