By Robert D. Hershey Jr.
N.Y. Times News Service
WASHINGTON _ Even before the holiday shopping season,
America's mighty army of retail consumers had begun to loosen its
grip on purse strings and wallets _ parting with $165 billion in
But as merchants bask in what for many was the best Christmas
in several years, economists are still trying to piece together
just where these shoppers are getting the money: from higher
incomes, by borrowing or by drawing from savings or other assets.
The answer could well determine the health of the economy in the
months to come.
Consumer spending on retail goods, rent and other services
accounts for two-thirds of the economy, but despite huge volumes
of data collected by the government and private sources, a
definitive answer has not yet been found to where the money is
coming from. And economists are offering diametrically opposite
forecasts for the months ahead.
Some, like Irwin L. Kellner, chief economist for Chemical
Banking Corp., say they are optimistic, believing the holiday
splurge bodes well for the economy in coming months.
"I'm very hopeful that it can be sustained," he said, citing
substantial recent growth in wages and salaries. "It's no
surprise it's a great holiday shopping season."
But many other analysts are more pessimistic.
"In essence, consumers have been spending more than they are
taking in, implying that in early 1993 they will be forced to
retrench," said Gordon Richards, economist for the National
Association of Manufacturers. "It is important not to be lulled
into a false sense of complacency by the apparently buoyant
Still others, like Neal M. Soss of First Boston Corp., hold a
sort of middle ground in their view that consumers will be
neither a strong positive force nor an economic drag, despite the
skimpiness of income-tax refunds coming this winter and spring.
To spur the election-year economy, the Bush administration
adjusted tax-withholding tables so that about $20 billion that
would otherwise have been collected by the government throughout
1992 and refunded in the early months of 1993 was immediately
injected into the spending stream.
Soss sees "episodic" increases in consumer spending, one of
which happened to coincide with the current holiday season, with
major growth held back by a lack of jobs.
"Employers feel this intense urge to economize on their head
count," Soss said.
The most confirmed pessimist may be Albert Sindlinger, a
pollster in suburban Philadelphia whose mid-December telephone
interviews uncovered "little cheer" for the 1993 economy.
"The consumer remains in a tremendous liquidity bind,"
Sindlinger said, "unable to sustain lasting growth in personal
consumption or in retail sales."
A look at the government numbers for the various gauges of the
consumer's financial position is instructive, though hardly
conclusive. But the figures do suggest that incomes are rising,
that a newly confident consumer is once again taking on new debt
and that households are also pulling money out of savings.
In short, today's spending is being fueled by all three
sources, but with little agreement to be found about their
relative importance or future course. …