The Decline of Durables

U.S. consumers are spending more--but U.S. manufacturers are enjoying it less. Behind this apparent paradox lies one of the profound changes in the economy: Americans are spending a steadily increasing proportion of their disposable income on services, and a steadily smaller proportion on goods, notably durable goods. This worries economists, for seldom if ever has the economy boomed without an upsurge in spending for durables. Such a surge does not seem to be in the cards this year, according to the Federal Reserve Board's quarterly survey of consumer buying intentions. Though car-buying intentions are up somewhat from a year ago, fewer consumers have immediate plans to buy houses or major appliances.

New Stabilizer. Part of the reason is that the average American already has his car, house, and appliances aplenty--and is hanging onto them longer than he used to. Where consumers' holdings of durables grew by an average 6% yearly from 1945 to 1957, the growth since then has averaged less than half as much, indicating that the pent-up wartime demand for hard goods has been satisfied. Equally important, as hard goods lose some of their status value, consumers are putting more of their record-high incomes into the pursuit of travel, culture, health and beauty. From 1956 to 1960, consumer spending for grooming aids, education, foreign travel and medical care jumped by some 40% each.

Consumers are also becoming more prudent. Spending for such services as insurance, brokerage fees and investment counseling has risen from $14.6 billion in 1956 to $20.6 billion last year.

More Families. The businessmen who depend on durables are trying many ways to win back a bigger share of the consumer dollar. 'It is up to us to provide our products with additional services,'' says Norge Chairman Judson Sayre, who recently equipped his home clothes dryer with an optional hair-dryer attachment to woo the women (TIME. June 30). Retailers of durables have also gone into service businesses. Sears, Roebuck's fast-growing Allstate Enterprises, Inc. has recruited 125,000 members at $12.50 each for its new national auto club, and now it has begun to sell foreign tours as well.

While most economists predict that the swing to services will continue, the long-term trends also favor some revival in sales of durables. Replacement needs are increasing because the stock of consumer durables has begun to age in recent years. More important, the World War II babies will soon begin to marry in large numbers and create a surge of demand for cars, houses and appliances. The number of couples setting up housekeeping--which at last year's level of 770,000 was barely half the 1947-50 average--will climb close to 1,000,000 next year, and then inch steadily upward.

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