BPEA | 1971 No. 3

The Outlook for Investment in Plant and Equipment

1971, No. 3

PRIVATE EXPENDITURES FOR EQUIPMENT and nonresidential construction,
as measured in the national income accounts, have shown a fair amount of
strength in the first three quarters of 1971, and it now appears that, for the
year as a whole, this investment total may even show a small real rise over
1970. Projections based on econometric equations suggest that considerably
larger advances may be in store for 1972 and 1973, though the magnitude
of the expected increases varies considerably depending on the
equation used. A considerable portion of the projected increases can be
attributed directly to the incentives provided by the likely restoration of
the investment tax credit for equipment spending and by shortened depreciation
lifetimes allowed under the new regulations first announced by the
Treasury in January 1971 and formally adopted in June.