Consumers Spending, but Where's Money Coming From?
Robert D. Hershey, Jr., THE JOURNAL RECORD
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 November alone.
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 Christmas season."
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. …