State of Business: The Free-Spending Consumer

STATE OF BUSINESS

As an economist once put it, a citizen casts a vote every time he makes a purchase. By that standard, the American consumer is trooping to the polls in record numbers—and voting his confidence in the U.S. economy. The Commerce Department reported last week that retail sales in July rose 1% over June’s alltime high to set a new record of $20.7 billion.

The rise was not spectacular, but economists took pleasure in it nonetheless. During the year’s first five months retail sales had hovered around the $20.3 billion-a-month mark, a remarkably steady performance but still not good enough for the chart watchers, who have come to depend so much on the consumer’s performance. “They expect each week to be a new world,” says the chief economist of a nationwide chain.

“Most Heartening.” The consumer is spending once more as the economists think he should. The last reported week shows department-store sales gains for every federal reserve district in the U.S. Opening a new budget-store branch, Detroit’s J. L. Hudson rang up $40,000 in the first three hours. Sales at Rich’s in Atlanta, the South’s biggest store, are running 8% ahead of last year’s. Sears, Roebuck and Montgomery Ward, the two biggest mail-order houses (Sears is also the world’s biggest retailer), both set sales records in July. “All this is most heartening,” beams an executive of one of Boston’s largest department stores. “Usually we hope to just remain constant through the first part of the year until fall, which is our season for making money.”

The consumer’s spending spurt encompasses appliances, food, apparel and general merchandise, but shows up most dramatically in auto sales. Though sales sagged slightly from a year ago during the first ten days of this month, Detroit is headed for a 7,500,000-car year that will break 1955’s alltime record. The automakers’ main worry, in fact, is that dealers will run out of stock before the 1964 models appear. Production of all 1963 models has just about stopped, and the inventory on hand at the beginning of the month was enough for only 44 more days of selling. Chrysler was sufficiently concerned by this fact to move the showroom introduction of its new 1964 models ahead one week, to Sept. 20.

Salting Away. Personal income is rising even faster than consumer purchases. The consumer continues to salt the difference away; personal savings rose by nearly $3 billion in the year’s first half. Since many items are routinely bought on credit even by those who can pay cash, consumer installment debt is also rising, reached a record $50.2 billion in June. Though there is some talk of too much credit, the Federal Reserve’s economists feel that the limit of installment credit has not yet been reached.

How the consumer behaves in the fall may well set the tone of the entire economy. Presumably he will keep on spending. Fall is traditionally the time of back-to-school sales and of buying that has been put off in the summer months. Next month, when the new $1.25 federal minimum-wage law goes into effect, 2,600,000 workers will get a 10¢-an-hour wage hike. Should there also be a tax cut passed by Congress (see THE NATION), the consumer’s dollar votes may give the U.S. economy the push that it needs to send it whirling into 1964.