Economic View ..Credit Policy Not Causing Slump in Autos
LAST WEEK the president of General Motors Corp. reduced his forecast of 1956 automobile production by 15 per</br></br>LAST WEEK the president of General Motors Corp. reduced his forecast of 1956 automobile production by 15 per cent and seemed to place much of the blame for lower automo-.bile sales on the restrictive credit policies of the Federal Reserve Board. Certain facts suggest that he picked the wrong' "whipping boy"; the real culprit may be the automobile industry itself, and/or the fickle public.</br></br>Personal Disposable Income (after taxes) in the first quarter of this year showed a $16.1 billion (6.2 per cent) increase over the first quarter of last year, but an analysis of personal expenditures shows that, either by choice or by necessity, this increase in purchasing power was channeled to uses other than the purchase of automobiles,</br></br>In the first place, it is difficult to see how there could be any quarrel with a $16 billion increase in personal purchasing power, whether or not one chooses to criticize credit policies, An increase of that size is one of the best annual gains on record. Nor, do we see any reason to believe that credit policies had much influence on the. publicÛªs use of this increased purchasing power.</br></br>It so happened that the public decided that it wanted to spend $4.3 billion (annual rate) more for food and beverages in the first quarter of this year than it did a year earlier. So 27 per cent of the splendid increase in purchasing power was absorbed for these items.