The Economy: The Life-Enriched Consumer

Never before has an economic cycle been scanned, scrutinized and statisticized as thoroughly as the 42-month expansion that the U.S. now enjoys. Economists compute, project and adjust for all kinds of indices — a 23.4% rise in G.N.P., a 27.6% increase in industrial production, a 62.5% climb in corporate profits, a 34% increase in stock values. But economic advances are as much flesh and blood as they are graphlines and columned totals. In this welter of statistics, how fare the 191.7 million Americans known collectively as the U.S. consumer?

The average consumer is making 20% more money since the expansion began, and his disposable personal in come — the amount left after taxes —has risen a little more than that. An urban family of four whose income was $8,000 three years ago now receives about $9,300. With costs relatively steady and economic fears fading (60% of U.S. families say they have no financial worries, v. 50% in 1961), house holds are spending 920 out of every dollar. This year, Americans are expected to increase their spending by $30 billion, compared with the $18 billion rise last year.

Frozen Foods & Baby Sitters. Economists discern significant turns in the way the 92¢ goes out. Naturally, consumers still think first of food, clothing and shelter, but the manner in which they think of them has changed. As they grow more affluent, Americans are buying steadily bigger and better homes. They eat 117 Ibs. less food a year than their fathers, but are spending $232 a year more for it. This is not so much because prices have risen but because consumers nowadays show a weight-conscious preference for green vegetables over starchy potatoes and a gour met’s delight in better meats and frozen specialties. For every $3.50 they spend on home-cooked meals, moreover, they pay out another $1 to dine out.

This year, for the first time in the current expansion, the consumer is in creasing purchases of such nondurables as clothing, shoes, jewelry and cosmetics, is spending $175.7 billion on such items. This follows a classic economic pattern. First came heavier spending on automobiles and other durables, along with an increase in money paid out for services. Now the shift toward nondurables is being accompanied by a rise in comfort-making durables or services: air-conditioner sales are up 40% this summer; people are spending more for summer camps and club memberships, pianos and hi-fi sets, and there is a young-mothers’ move toward daytime baby sitters while they shop.

Baby sitters demand cash, of course, but nearly all the air conditioners, like an increasing number of other purchases, are on installment plans. The American’s personal debt is rising at the rate of $1 billion a month, now stands at $70.9 billion. One of every two families owes an installment debt, and 15% of monthly disposable income is earmarked to repay it. But in the aura of prosperity created by current economic news, few consumers worry about debts, partly because they feel protected by such social bulwarks as job security, unemployment insurance, social security and pension plans.

On to Three Cars. Younger couples account for a sizable amount of the debt: they want to start with a houseful of goods that older couples used to take years to acquire. Bankers consider debt a logical tool of prosperity, particularly since bad debts represent only 1% of total loans outstanding. Consumers have balanced the debt increase with a rise in personal savings, from a customary 7% of disposable income to 8.2% in this year’s second quarter. Economists consider this a temporary plateau that will hold until consumers adjust to higher incomes, feel that higher savings could be a backlog of buying power to be used as 1964 goes on.

Of all the shifts in spending, none has been more dramatic than the increase for leisure. Of personal loans in New York City banks this summer, 21% are being taken out for travel; on the West Coast, tourists to the Orient have doubled in two years. Across the U.S. the housewife ranks second after the businessman as a passport applicant. Those who stay home spend on second homes, pleasure boats and swimming pools; in California 3% of all boat owners earn less than $5,000. In addition, 25% of all families now own two cars—and the latest trend is to a third. ‘There is only so much steak one can eat without getting indigestion,” says Boston Banker Richard Chapman. “So it seems only logical that the three-car family and the second television is merely the next step.”

Yet the American consumer is not squandering his money frivolously. Of the $2,100 that the average family has left over yearly after meeting basic needs for food, shelter and clothing, more and more is being used to upgrade the quality of housing or medical care and increase outlays for children’s education, or is just being held in larger amounts of cash in pocket. Seeking a way to describe the shifting patterns of the consumer, the Philadelphia Federal Reserve Bank recently decided that he has gone through three spending tiers and is now in the midst of a fourth. The bank called it the “life-enriching stratum.” The average consumer would probably be content just to say that things are very good indeed.