Cash registers in January rang up continuing consumer confidence

Consumers are still confident about the economy. The amount of buying they are doing seems to prove it. January retail sales were up 2.2 percent from December, and up 13.1 percent compared with the same time a year ago, according to figures released by the Department of Commerce Tuesday.

''Consumer spending is still pretty positive,'' says Sandra Shaber, an economist at Chase Econometrics, a forecasting firm. And, she explains, it looks as if it will stay that way for a while because of rising incomes, continuing job growth, and modest inflation.

The news comes as a relief to those who were concerned over December's surprisingly low increase of only 0.1 percent from November sales. While shoppers spent heavily on apparel in December, giving department stores a boost, they overlooked the rest of the retail industry. Economists also say that mechanical factors, like bad weather and selling days lost because of the way the holiday fell, were probably contributors to the minuscule upturn in what should have been the biggest selling month of the year.

One reason January looks so good is auto sales. They weren't just a big deal, ''They were a huge deal!'' says John Hammond, a consumer economist at Data Resources Inc., another forecaster, in Lexington, Mass. Car sales for the month were the strongest they've been in four years. ''They aren't leading overall retail sales, but they are finally beginning to catch up,'' he adds.

Mr. Hammond also says strong consumer spending will have a political effect. ''The Federal Reserve's constant worry is about inflation. And the early signal of inflation is an overly expansive economy . . . It (strong retail sales) will only reinforce the Fed's recently stated view: that it won't let up on credit reins.''

But he also believes the Fed won't ''overreact'' or look just at retail sales , but will be more interested in overall consumer spending figures. Those figures should give the Fed a broader picture, including money spent on services and energy.

Sidney Jones, Commerce Department undersecretary-designate for economic affairs, does not put too much behind the figures. They were an expected snapback, he says, and then goes on to mention that ''one month's, or one quarter's, figures don't change the underlying reality of serious problems'' in the economy - referring to the mammoth federal deficit. He still sees the economy slowing down in the second half of the year.

While consumers felt good about spending in January, economists, government officials, and investors are moving through February in discomfort. The deficit, anticipation of higher interest rates, and a sliding stock market have them worried. Will that burden catch up with consumers and put the brakes on their spending?

Sandra Shaber says they won't slow down ''until the day that interest rates start rising or until the rate of unemployment gets stuck.''

At Data Resources, Hammond agrees, but he also thinks consumer confidence could get shaken. ''February (sales) could go two ways: The increase in worrisome news could dampen consumer optimism. On the other hand, the weather's really broken. And if the mild weather continues, spending could really pick up.''

Regardless of attitude, though, consumers seem to have the financial means to spend. Although it has been growing at a record clip, consumer installment debt is still a modest percentage of disposable income (that is, income after taxes). This gives consumers plenty of room to go out and buy, says Fred Wintzer, a retail analyst at Lehman Brothers Kuhn Loeb, the New York brokerage firm.

Mr. Wintzer believes 1984 will be the year shoppers start buying the ''middle-ticket durable items,'' the golf clubs and food processors that people have been avoiding. ''It will be a very strong year,'' he says. ''Consumer confidence is up, and their balance sheets are strong.''

You've read  of  free articles. Subscribe to continue.
QR Code to Cash registers in January rang up continuing consumer confidence
Read this article in
https://www.csmonitor.com/1984/0215/021527.html
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe