After the Spree: Consumers' Spending Shows Signs of Stalling In First Quarter of '88 --- Auto, Airline and Retail Firms Act to Counter Problems; 'Promote a Little Harder' --- Failing Engine for Economy
Consumer spending, the engine that has driven the economy for more than five years, may be running out of steam.</br></br>No one knows how much consumers will retrench. But executives in consumer-sensitive industries such as retailing, airlines and automobiles are viewing the 1988 first quarter as a big test. After long enjoying healthy growth because consumers have been splurging more than saving, the executives are now worrying that the buying binge may be over.</br></br>The just-ended Christmas season provided some clues. Retail sales, which started slowing last summer, didn't collapse after the October stock-market crash, as some people had feared. But after several years of growth exceeding the inflation rate, Christmas sales, adjusted for inflation, were essentially flat compared with a year earlier.</br></br>Thus, consumer spending has "stopped being a source of growth for the economy," says Carl Steidtmann, the chief economist at Price Waterhouse's Management Horizons consulting unit. Yet most analysts expect the economy to keep expanding this year, though more slowly than in 1987. For that to happen, Mr. Steidtmann notes, "other sectors are going to have to pick up the slack."</br></br>Both of the other two big private sectors seem likely to pick up a bit. U.S. net exports, aided by the drop in the dollar, are expected to strengthen gradually, and many economists expect 1988 capital spending to rise about 4% to 5%, adjusted for inflation.