Gains of about 6% foreseen for capital spending in 1998
The nation's trade surplus in materials handling equipment has averaged $831 million annually during the past 5 years.
By Daryl Delano -- Modern Materials Handling, 2/1/1998
The Department of Commerce recently released Gross Domestic Product (GDP) figures showing that business investment spending by U.S. companies continues to grow at a breakneck pace. On a seasonally-adjusted annualized basis, capital expenditures increased at a 14.6% rate during the second quarter of last year and by an 18.1% rate during the third quarter of 1997. The gain in overall GDP during the six-month period was 3.3%.Total spending for new plant and equipment amounted to an estimated $861.4 billion last year. In inflation-adjusted terms this represented a gain of 10.2% from the robust 1996 total. It is estimated that about 26% (approximately $224 billion) of total business fixed investment during 1997 went towards the constructing or retrofitting of industrial plants, warehouses, utilities, office buildings, and other nonresidential buildings. The remainder, more than $637 billion, was spent on new equipment, representing everything from computers and machine tools to industrial trucks and conveyors.
In real, or inflation-adjusted, terms, investment in the construction and renovation of nonresidential buildings increased by 4.1% last year-a growth rate a bit below the 1996 gain. Investment in new equipment grew by a much stronger 12.5% during 1997.
Business investment growth will begin to slow this year, however. Even so, capital spending should remain at a healthy rate, and should increase, in percentage terms, at a faster pace than overall GDP. But corporate profit gains will be harder to come by in 1998, with slowing demand in the U.S. and in most of our important Asian trading partner countries.
We foresee capital spending gains of about 6% for 1998, with growth in business investment in buildings increasing by 4% or less, and investment in new equipment moving ahead at about a 7% pace. These percentages certainly indicate slow growth when compared to the heady numbers of the past several years. This situation appears to be no more than a lull in a long period of solid business investment gains that should be with us at least into the early months of the new millennium.
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