Opening the Closed Fist

As they readied themselves for this week's traditional onslaught of last-minute shoppers, U.S. retailers were virtually assured of a Christmas sales record --for the 14th year in a row. Although pleased at that prospect, most store own ers are anxiously waiting to see whether the holiday spree will trigger an upsurge in consumer spending in 1 968.

Their common concern, as Atlanta Appliance Dealer J. M. Harper puts it, is that the consumer may have merely "opened his fist temporarily, and after Christmas will close it again."

While 1967 retail sales are expected to wind up 4% ahead of last year's level-- at a record $314 billion-- a sizable chunk of that increase reflects inflationary rises in retail prices rather than growing consumer demand. The effects of inflation-are also disturbingly apparent in the burgeoning costs confronting merchants for labor, promotion and goods. Because of the cost squeeze, retailers may well have trouble maintaining profits unless there is a substantial increase in their sales volume.

Longer Work Week. With disposable personal income at an alltime high, the odds seem good that people will start spending more and saving less. In recent months, uncertainty over inflation, the Viet Nam war and the possibility of a federal tax increase have prompted consumers to salt away an abnormally high 7% of their disposable income savings. They also have been taking extra pains to stay out of debt; installment credit is expected to grow by only $3.5 billion in 1967 v. $6 billion last year. While such thriftiness has hurt sales up to now, it means over the long run, says one Federal Reserve Board economist, that the average consumer is "in a better position to take on new debt for a color TV set."

That view has its encouraging side in this time of lagging sales of durable goods, most notably in the strike-afflicted auto industry. Though Detroit is still feeling strike effects--auto sales in the first ten days of December were running 12% behind last year--the industry continues to count on a sharp rise on 1968 sales charts. One automaker, Henry Ford II, last week predicted that next year's car and truck sales will be up by 900,000, matching 1965's record sales of 9,300,000. Even if a demand-dampening tax increase is enacted, said Ford's chairman, "I think we are going to have a very good year."

Because of the recent upturn in home construction, a similar improvement is likely in the sales of such durable goods as major household appliances and home furnishings. With soft goods already running strong (this year's Christmas gift favorites include such items as lime-scented shaving lotions, textured hose and men's turtleneck sweaters) retail sales rung up during 1968 could increase by as much as 7%.

-Another inflationary sign came last week, when the Federal Reserve Board announced that during November, the nation's industrial output took its sharpest monthly jump in three years--rising 2.6 points on the board's index, to 159% of the 1957-59 base period.

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