BPEA | 1970 No. 1

Plant and Equipment Spending in 1969 and 1970

Winter 1970

Plant and equipment spending by American business is projected
to rise by more than 10 percent in 1970, accordinig to the first quarter survey
of the Office of Business Economics and the Securities and Exchange
Commission (OBE-SEC). While such a rise does not amount to a boom,
it does appear surprisingly large in the face of stagnation in the growth of
real gross national product, declining profits, sagging stock prices, low
capacity utilization in manufacturing, repeal of the investment tax credit,
and bond yields that were at record highs in late January and February
when the survey was made.
If realized, these reported anticipations (plans reported by businesses
but adjusted upwards to reflect systematic underestimations in the past)
would amount to the seventh largest percentage increase in the twentythree
years the survey has been conducted (behind 1951, 1956, the years
1964-66, and 1969). Although at the current rate of increase of the investment
price deflator, about 4 percent of the rise would reflect price increases,
the real growth would be substantially greater than that predicted
for the economy as a whole. Coming on top of an 11.5 percent rise in 1969,
the advance would carry business spending to a volume, measured as a
proportion of predicted gross national product, that would place 1970
alongside the boom years of 1956 and 1957.