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Hugh D. Galusha, Jr. November 16, 1965 Retail Trade Any discussion of retail trade prospects requires as a preliminary an examination of consumer statistics. This can he a tedious exercise, albeit a necessary one. I will try to make it less so by discussing only the major dimensions of the 1966 consumer, as these dimensions emerge by logical ex* tension of what they are now. Admittedly, this is dangerous -- in a complex fast moving economy like ours, numbers and the trends they portend are as fickle as the weather •• about which there is an old Montana saying that only fools and pilgrims predict the weather. prediction, but a prolection. Let me add then that this is not a Besides, while 1 deny the first category, 1 must accept classification as a pilgrim to the wonderful world of economics. The Important current dimensions appear to be these: Consumer income Employment levels Debt service as a X of consumer Income Savings as a 1. 2. 2a. % of consumer Income Consumer income. Non&gricultural employment - Twin Cities. Nonagrlcultural employment - Minnesota, 9th Dist., United States. _ 3• ( Personal income. ( Per capita personal income. . ( Mortgage debt outstanding. ( Debt service. Savings as a Z of disp. personal income. 5. Although only a general measurement, GNP this year will be In the 670 billion range, and Is estimated to be 700 or better In 1966. These conclusions may be drawn, at least tentatively: (a) More consumers are working today than ever before, and the trend Is up. (b) Pay scales are up. (c) Consumers have been spending more and saving less. (d) If these trends are not arrested, the current high level of economic activity will continue well Into 1966. As I said, these are projections based upon a logical extension of known facts. But It Is quite possible ,for these projections to be deflected from their targets by external forces. Certainly major among these would be a sharp Increase In prices, which would trigger restrictive action by the Fed. In no other area of the current economic scene Is there more confusion and uncertainty. Old Omar must have had the economists of 1965 In mind when he wrote: "Myself when young did eagerly freouent Doctor and saint, and heard great argument About It and about. But ever more came out By the same door w h e r e i n I w e n t .'1 How much is the economy heating up? The pessimists see a number of ominous signs -- notably, though, the consumer price index, which has increased 1.3Z this year. Similar Increases have taken place In the wholesale price index, after a five-year period of relative stability, where an Increase of 1.9% occurred between January and August. Food was the major component, showing an Increase of 4.5Z, most of which was prior to June. Demand is pressing hard on our Industrial capacity. Plants are running full steam ahead, but the gap is closing. (Christian ethic) Yes, but the aptimists argue, the increase in the consumer price index covers a number of components. accounts for a goodly part abnormal supply factors. The food component increase last spring of this increase, and that increase was caused by Services have increased in price, in substantial measure, because of limited numbers of young people entering the field -- a trend of some years background. September 1961 level. Durable goods have actually declined to a Also, they say, look at the increases in quality. Finally, they say, we must have a measure of inflation, selectively expressed* as a part of the price for full employment and good times. Besides, the President won't let it happen anyway. 1 must confess to a measure of uneasiness -- but at this moment, there seem to be almost as many signs one way as the other. Perhaps the major source of uneasiness is the generally euphoric feeling that somehow we have licked the business cycle. Perhaps -- How about retailing specifically? The numbers are impressive. Minnesota has generally stayed ahead of the nation this year, even though the District as a whole only met the national increases in A out of the 8 months for which complete data are available. Looking at the components, there is an obvious distortion in the totjals attributable to the extraordinary auto sales this year. In the District, other area6 of retailing showed a far less spectacular performance, with some categories running behind a year ago through August., By all Indications, though, this Christmas should be the best ever. U. S. News & World Report, in a recent issue, stated sales rises of 5% to 10% are generally anticipated. Foreign goods, quality items, higher priced gifts, are high on the shoppers' lists. To auote from this article: "The general boom also portends a record volume for Christmas. There are more people at work this year at higher wages and salaries. There are few signs of any halt to the prevailing prosperity. Sur veys indicate people are optimistic and in a mood to spend their money on more of the things and services they want. "People have shown a tendency to spend more of their income and to save a bit less. That means more business for the nation's -merchants." Applying the close linkage between retail sales and the general health of the nation, next year should ,be 4% to 5% ahead of 1965, based upon GNP estimates. I have quoted U. S. News with approval, for the linkage premise is the one on which I have based my' reasoning in this talk. If I am wrong, I will have distinguished company. But, lest you believe I, too, am from the Land of the Big Rock Candy Mountain, like the rest of the optimists prophesying our entry into the milennium of perpetual prosperity, I must warn you again that it ain't necessarily so. Clouds no larger today than an errant cipher on a computer printout could develop in the next ninety days and force the Federal Reserve to move restrictively to contain inflation breakouts, which, in turn, could cause us to falter again in the smooth, even progression into an apparent milennium. EFFECTIVE BUYING POWER -- MINNEAPOLIS-ST. PAUL Net Dollars (000's) % ChS . Per Capita % C h fi. Per HousehoId % Chg. $7,700 $2,275 1961 $3,498,221 1962 3,793,805 +8.4 2,376 +4.4 8,079 +4.9 1963 3,866,633 +1.9 2,435 +2.5 8,283 +2.5 1964 4,168,964 +7,8 2,590 +6 .4 8,836 +6.7 +• »3. J 3- £ * 7 //• / $ 3Lo //• £ SOURCE: Sales M a n a g e m e n t , Survey of Buying Power. / /J t / > / November 15, 1965 Research Department Federal Reserve Bank Minneapolis, Minnesota 55440 NONAG R I C U L T U R A L EMPLOYMENT — TWIN CITIES M E T R O P O L I T A N A R E A (in thousands) Total 1962 1963 J anuary February March April May June July August September October November December 587.9 598.1 579.9 578.2 581.7 594.0 600.0 604.8 599.2 603.2 608.6 611.2 607.9 608.8 1964 January February March April May June July August September October November December 611.0 589.2 587.0 590.0 600.4 610.2 617.4 615.8 617.9 624.0 628.5 624.6 626.9 1965 January February M arch April Ma y June July August September 611.2 609.8 610.2 624.1 630.9 637.0 636.0 638.0 644.6 November 15, 1965 Research Department Federal Reserve Bank Minneapolis, Minnesota 55440 % Change from a year earlier +1.7 +2. 2 +1. 6 +1.5 +1.4 +1.1 +1.7 +2. 1 +2. 8 +2.4 +2.5 +2. 8 +2.7 +3.0 +3.7 +3.9 +3.4 +3.9 + 3 .4 +3.2 +3.3 +3.3 +3.3 NONAGR I C U L T U R A L EMPLOYMENT IN MINNESOTA, N I N T H DISTRICT, AND UNITED STATES (in thousands) Minnesota Ninth District S-Chgi United States 1,505.0 % Chs. -- 55,515 -- % Chg 1962 985.6 1963 1,002.8 +1.7 1,531.6 +1.8 56,643 +2.0 1964 1,027.4 +2.5 1,562.9 +2.0 58,188 +2.7 1965 1,058.6 H +3.0 1,593.4 11 +2 .0 59,910 2 / +3.0 _1/ Based on 2/ Based on nine-month average. SOURCE: ten-month Department of Employment and Security. November 15, 1965 Research Department Federal Reserve Bank average. f7 e > L-tf- 9 1 ya 7 -v () or * <_> ; * 7 7~ PER CAPITA PERSONAL INCOME (in dollars) Minnesota % Chg. 1962 $2,208 -- 1963 2,334 +5.7 1964 2,375 +1.8 SOURCE: U. S. Department of Commerce. November 15, 1965 Research Department F e d e ra 1 R e se rv e 1 lnk 3' Minneapolis, Minnesota 55440 Ninth District $2,181 % Chg. United States % Chg, --2.2 2,132 2,160 $2,367 2,448 +3.4 2,566 +4.8 +1.3 TOTAL PERSONAL INCOME (millions of dollars) Minnesota Ninth District % Chg^ United States $12,130 % Chg. -- $439,977 1962 $7,712 1963 8,152 +5.7 12,390 +2.1 461,670 1964 8,364 +2.6 12,670 +2.3 491,004 533,600 * 1965 * Based on first nine months. SOURCE: Federal Reserve Bank of Minneapolis and U. S. Department of Commerce. November 15, 1965 Federal Reserve Bank Minneapolis, Minnesota 55440 MORTGAGE DEBT OUTSTANDING (billions of dollars) / All Properties 1- to 4- Family Houses 1960 $206.8 $141.3 1961 226.3 153.1 1962 251.6 166.5 1963 280.8 182.2 1964 311.4 197.7 286.8 295.5 303.6 311.4 185.2 189.6 193.9 197.7 317.5 325.1 200.3 Quarter: I II III IV 1965 Quarter: I II SOURCE: Federal Reserve B u l l e t i n , Board of Governors of the Federal Reserve System. November 15, 1965 Research Department Federal Reserve Bank ■'V DEBT SERVICE CONSUMER INSTALMENT CREDIT REPAID (millions of dollars) Monthly Total July $5,058 5,094 August September 5,104 October 5,097 5,155 November 5,256 December 1965 January February March April May June July August * 5,213 5,381 5,393 5,445 5,435 5,537 5,612 5,679 11.5 11.4 11.4 11.9 12.2 60,696* 61,128 61,248 61,164 61,860 63,072 12.4 12.4 12.3 12.3 12,3 12.5 62,556 64,572 64,716 65,340 65,220 66,444 67,344 68,148 12.2 12.5 12.5 12.5 12.4 12.6 12.7 12.8 Annual r a t e . SOURCE: Economic Indicators. November 15, 1965 Research Department Federal Reserve Bank % of Total Personal Income $45,972 47,700 50,620 55,111 60,418 1960 1961 1962 1963 1964 Amount SAVINGS IN THE U. S. Savings as % of disposable ______personal income______ 1960 4.9 1961 5.8 1962 5.6 1963 5.1 1964 6.0 Quarter: I II III IV 5.5 6.3. 5.7 I II III 5.3 5.0. 5.8 1965 Quarter: SOURCE: Economic Indicators November 15, 1965 Research Department Federal Reserve Bank 6 .6 This file contained a copyrighted article which has been removed. The citation for the original is: “Christmas Trade: Record Boom?” U.S. News & World Report 59, no. 19 (November 8, 1965): 37–39.