The champagne bubbles for Year 2000 had barely gone flat before gloomsayers began worrying about a hangover. What if Americans, who engaged in a preternatural buy-now pay-later spending spree to load up for a millennium crisis that never arrived, cooled their profligate ways? Adding to such concerns: bitterly cold weather and record postholiday snows that paralyzed parts of the country and forced merchants to close stores. That brings us to Friday’s report on January retail sales. Economist Tim O’Neill said it will show a gain of 0.7 percent, a moderation from the sizzling 1.2 percent advance in December. “Americans took a slight pause last month, but there is no sign they are displaying any spending fatigue,” said O’Neill, of Chicago’s Harris Bank and its parent, Bank of Montreal. He said Americans stocked up on groceries ahead of Y2K, so supermarket sales edged a bit lower last month. Overall, though, O’Neill said, “confidence remains sky-high, the job market is strong, and there is not much to hold consumers back.”
CONSUMER CREDIT
ANOTHER GAIN
Thanks to the invention of plastic, Americans are able to consistently spend money faster than they earn it. Consistently, monthly expenditure figures outmatch the growth in income. Watch for Monday’s report on December consumer credit to show another gain, but nothing as outsized as the $15.6 billion jump in debt a month earlier.
LABOR
A PRODUCTIVE GROUP
Workers who put in long hours don’t always get a pat on the back from the boss. However, such employees get rave notices and effusive praise from professors and analysts, who point to the economy’s growing ability to push out more and more goods and services. Watch for more of the same Wednesday, with the government’s report on fourth-quarter labor productivity and costs. Economist Steven A. Wood said that “after rising an anemic 1.5 percent a year between 1973 and 1995, labor productivity has nearly doubled.” Wood, of Banc of America Securities, added, “the recent trend in productivity has been accelerating, reaching just over 3 percent last year.”
FEDERAL RESERVE
MARKET MANEUVERING
There was jubilation coupled with puzzlement last week when the Federal Reserve boosted short-term interest rates, only to create an unexpected buying boom on Wall Street. But Chicago investment manager William Hummer said it is too soon to assume financial markets can outwit a Fed bent on slowing a raging torrent of monetary liquidity. After four rate increases in eight months, he said, “There is no precedent for successive moves by the Fed to have so little effect. The Fed now sees a fairly urgent need to step up the pressure and slow an excess supply of money and credit.” Hummer, of Wayne Hummer & Co., added, “It is all but certain that the central bank will take further action next month. That means sectors of the stock market could react to the downside. Of course, some stocks already are depressed; so it is important to be selective.”
