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Is Some Of The Fizz Going Out Of Capital Spending?


Economic Trends

IS SOME OF THE FIZZ GOING OUT OF CAPITAL SPENDING?

With production of business equipment scoring a cumulative advance of 2.7% in September and October, the capital-spending boom seems to be right on track. But other statistics raise a warning flag.

According to the latest gross domestic product data, growth of real outlays on producers' durable equipment slowed sharply, from a 19.8% annual clip in the second quarter to 9% in the third. At the same time, the book-bill ratio for semiconductors eased in October, suggesting a slackening of demand in that key spending sector.

One reason the pace may be starting to slow: Some companies are finding they can no longer finance their spending out of cash flow and are unwilling or unable to take on heavy debt.GENE KORETZ


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