Where do consumers find the money to keep on spending? It's a question that baffles some of the nation's top economists. Many of them had predicted that consumers would virtually close their wallets in 1981 -- at least until after the Reagan administration's proposed tax cuts or some capping of the inflation rate.
They said that consumers, buffeted by rising energy prices, higher interest rates, stepped-up taxes, and double-digit inflation, would be hard pressed to put out dollars for anything but necessities.
But while today's economy could hardly be described as booming and sales have been far better in years past, Americans are still buying.
Though some in the many crowded stores and restaurants may be only shopping the bargains, consumers clearly did not settle into a postrecession recuperation period.
The economy grew twice as fast in the last quarter of 1980 as most economists predicted. According to US Department of Commerce figures, retail sales went up 2.9 percent this January. And February sales rose by close to 1 percent, marking the ninth straight month of gains.
Stimulated by rebate offers, lackluster auto sales jumped 21 percent during the last 10 days of February, the best such sales stretch in 17 months.
"Retail sales have grown surprisingly rapidly and persistently over the last few months," confirms Commerce Department economist William Cox, attributing much of the growth to the recovery in sales of new and used cars and parts and to the higher price of gasoline. "The expected sales turndown hasn't happened yet."
Some of the spending was for construction, especially for office buildings, and for such high technology items as microwave ovens and videotape recorders.
Some economists suggest that middle- and upper- income Americans, benefiting from high interest rates in money-market funds and with more cash on hand as homeowners taking tax deductions, have been responsible for much of the continued consumer spending. They point, too, to the rising number of households as a factor in increased appliance sales.
In general, however, consumers appear to be more willing than able to afford more spending. Savings rates are lower than usual, and many shoppers have borrowed the funds to buy what they want.
Robert Gough, chief sales forecaster for Data Resources Inc., cautions that consumer debt figures include the many who use credit cards for convenience and pay off charges in 30 days. Also, he says, consumers are much more inclined than in the past to spend in a time of high inflation on the theory that prices will only go higher.
"The consumer is much more sophisticated these days; he's not in a position that demands immediate and drastic retrenchment," says Mr. Gough.
Business, which has spurred much of the buying with special sales and promotions, has not necessarily gained that much from the continued consumer spending. Crain's Chicago Business, a weekly newspaper, recently reported that Chicago's top 150 companies last year increased sales by 9.5 percent, but profits went up only 2.5 percent.
And some economists suggest that sales nationwide were so low for much of last year that this year's gains are deceptively impressive.
"Consumers haven't been spending all that wildly," insists Fabian Linden, director of consumer economics at New York's Conference Board. "And there's no accumulation of convincing evidence to suggest that things are improving -- it's premature to sing 'hallelujah.'"
Most economists do agree that consumer spending is likely to slow down in the months ahead. Inflation is expected to continue outpacing income growth, and unemployment rates are likely to stay high.
"It may be that the consumer will forge ahead until he's saving nothing, but we're expecting fairly slow growth for the rest of this year," says the Commerce Department's Mr. Cox. "The initial snapback from the recession is pretty much behind us."
"In all likelihood the economy will keep going about 20 miles an hour, and consumer spending will probably continue in a relatively slow growth pattern," says sales forecaster Gough.
"The major problem will continue to be inflation," says economist Robert Dieli of the Chicago Continental Bank. "The level now really dictates people's expectations about earnings and spending and disrupts their plans to save for the future."
But other economists suggest that consumers could surprise the experts once again. Given some stimulus like less unemployment, lower inflation rates, or a continued fall in interest rates, they could start borrowing again.