
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, April 8, 1994                   TAG: 9404080218
SECTION: BUSINESS                    PAGE: A-9   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

INVESTMENT PLANS AFOOT

Encouraged by the expanding economy, American businesses are planning a big increase in investments for new buildings and equipment.

The Commerce Department said Thursday that businesses plan an 8 percent increase in 1994, which would be the biggest jump in capital investment since an 11.4 percent jump in 1989.

The latest figure is sharply higher than the estimated 5.4 percent rise that businesses had projected just three months ago. Last year's increase was 7.1 percent.

``It's consistent with the recent stronger-than-expected growth in the economy,'' said economist Priscilla Trumbull of the WEFA Group, a Bala Cynwyd, Pa., forecasting firm.

She said she was not surprised that the government attributed a big part of the projected rise to the automobile industry. ``Car sales have really been much stronger than three to six months ago,'' she said.

Commerce Secretary Ron Brown said the increase "demonstrates that investment is not being choked off by the recent run-up in long-term [interest] rates.'' He said improving profits and cash flow and strong demand also are spurring investment.

Several thousand businesses surveyed by the Commerce Department during the first quarter of 1994 said they would spend $633 billion this year - up from $586 billion last year - on construction and modernization of buildings, installing new computers and upgrading other equipment and machinery.

Spending rose 3.4 percent in 1992 after a rare 0.8 percent decline in 1991.

When adjusted for inflation, the projected investment increase is 9.8 percent this year, after 8.6 percent in 1993. The current figure, if realized, would be the biggest inflation-adjusted rise since a 15.8 percent jump in 1984.

Manufacturers plan a 7.5 percent increase in investment spending this year, compared with a 3 percent rise in 1993. Nonmanufacturing companies plan an 8.3 percent jump on top of last year's 9.1 percent.

Among the industries with the largest increases planned this year are blast furnaces and steel works, 26.5 percent; stone, clay and glass manufacturers, 23.8 percent; automobiles, 19.3 percent; and electrical machinery, 12.2 percent.

Industries with the most pessimistic plans include aircraft, projecting a 17.3 percent drop; non-electrical machinery, down 5.9 percent; fabricated metals, down 4 percent, and non-iron metals, down 1.7 percent.

by CNB