The Economy: New & Exuberant

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Many people put down the consumer's protracted spending splurge to his relief at the end of the Cuban crisis last fall—but that is only part of the story. Because the new economy has created some built-in balances, it may well be that the enthusiastic consumer will seldom again feel that he needs to save as much as before. One businessman who believes so is Federated Department Stores' Ralph Lazarus, 49; he began in the bargain basement and is now president of his family-run chain, which extends from Filene's in Boston to Foley's in Houston. "The American consumer now enjoys profit-sharing, private pension funds, health insurance and social security," Lazarus points out. "All this has the effect of increasing the spendable part of disposable income, and it also increases the willingness to use credit."

The consumer—"optimistic, materialistic, hard-working'' is the way Lazarus characterizes him—is now in debt to installment lenders on the average of $860 per family, an increase of $70 in the last year. More than ever before, credit has become socially acceptable, even among those who can afford to pay cash. But, at the same time, the consumer seems to be keeping his head: repayment rates are now rising faster than new loans.

The urge to spend is satisfied in myriad and wonderful ways. Because women have plenty of money to go to beauty parlors, sales of Gillette's Toni Home Permanents have fallen off—but Gillette gamely considers the trend good news for the economy as a whole. At Los Angeles' May Co. department stores, a $200,000 collection of primitive art from New Guinea is selling like sunglasses at $3 to $3,000 apiece. There is a boom in book and encyclopedia sales, and the cosmetics industry is lifting its face this year toward $2 billion in sales for the first time. There is also a definite tendency for American consumers to "trade up" to more luxurious items and better grades of clothes and appliances; sales of fine jewelry are rising faster than those of costume jewelry. In Atlanta the owner of a finance company that does business throughout the southern states is having remarkable success with his contribution to the credit expansion: dog-buying on time.

The Auto Boom. Nowhere has the consumer's urge to buy—and his use of credit—had more impact than in the auto industry. This year, neat styling, standstill prices and the growing number of overage cars now on the road have combined to spur a love affair between the consumer and Detroit and send the auto industry off on a boom of its own. Of the $48.2 billion of consumer installment credit outstanding, fully $19.7 billion represents automobile paper. The splurge has shattered Detroit's belief that it could not expect to sell anywhere near 7,000,000 cars for two bumper-to-bumper years. On top of last year's sales of 6,900,000 cars, the industry so far this year is selling at an annual rate of almost 7,500,000, which would, if sustained, break the record set in 1955.