Newspaper article THE JOURNAL RECORD

Wall Street Analysts Concerned about Behavior of Consumers

Newspaper article THE JOURNAL RECORD

Wall Street Analysts Concerned about Behavior of Consumers

Article excerpt

NEW YORK - The recent behavior of American consumers has many Wall Street analysts more than a little worried.

According to government figures, consumer spending lately has been growing faster than personal income, plunging the savings rate to a record low.

While it continues, of course, free spending by consumers helps the economy. But economists are concerned that it is running at an unsustainable pace.

If the consumer should suddenly come up with empty pockets, the potential consequences for the economy are worrisome, to say the least.

And in the meantime, money not saved is money not available for capital formation to finance such things as new homes and businesses.

""The consumer is not only running out of the purchasing power needed to reaccelerate the industrial sector, but also he may be on the verge of decelerating in order to revive his savings rate,'' said Edward Yardeni, economist at Prudential-Bache Securities.

Right now would be an especially inconvenient time for consumers to run low on buying power, with the approach of the holiday selling season, a make-or-break period for many consumer businesses.

But help may be on the way. For one thing, government statistics on national income are due for one of their periodic full-scale revisions late this year, and many observers expect them to show a greater degree of saving than has been reported so far.

""The personal saving rate is probably not so meager as suggested by current figures,'' said Donald Straszheim, chief economist at Merrill Lynch, Pierce, Fenner & Smith. ""Fears about the vulnerability of the consumer sector should be allayed.''

Furthermore, some analysts believe the makeup of the 1985-model American consumer is misunderstood. ""The consumer is not through for this cycle,'' contends John Connolly at Dean Witter Reynolds Inc. …

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