The Noble Consumer

Economists carefully measure the behavior of the consumer, and with good reason: consumer spending soaks up two-thirds of the nation's entire output. In 1963 the consumer is even more important than usual. Capital spending by business, one of the prime necessities of an economic upturn, has yet to increase significantly beyond its 1957 level. Government spending will probably be held down by the sharp political reaction to the threat of a large federal deficit. Industrial production has slid off the peak it reached last September, and in January just managed to equal December's performance. Any strong economic advance in 1963 will have to originate somewhere else, and many economists feel that the consumer is the only one left to start it.

So far, the consumer has behaved nobly. With his income at an alltime high, he has continued to spend 93% of all he earns after taxes, and has gone into debt to the extent of 14% of his net earnings--very near the point at which economists figure he begins to stop spending until his bills are paid. In fact, economists credit the consumer with having averted a business downturn by going on a spending splurge at the end of 1962. Autos are still the biggest beneficiary of that splurge, and sales in the first third of February ran 12% ahead of last year. Sales of radios, television sets and furniture are also rising and have helped to lift total retail sales for the first week of February to 6% above last year.

While pleased with this performance, economists feel that consumer spending must rise even faster than the 4% a year it has been rising, if it is to act as the catalyst for a strong economic advance. The reason: industry's present capacity has been more than enough to handle the consumer's spending rise up to now; capital spending and industrial production are not likely to rise much without even bigger consumer spending. Thus, economists who feel that the consumer needs a new stimulus count heavily on the tax cut that, to judge by public opinion polls, the consumer is leery of.

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