A Recession of Hope

If economists were poets, they would pay more attention to spring. That season of hope and expectation is normally a time for Americans to shake off their winter torpor, get out of the house and spend. Yet when spring began officially last week, consumers were in one of their chilliest moods in many a season.

Despite strength in other economic indicators, nearly every thermometer of national consumer sentiment has plunged. For the first time since 1971, a majority of Americans--54%, to be exact--consider the nation to be in a recession, according to the Harris poll.

The consumer confidence index maintained by the University of Michigan's respected Survey Research Center hit its alltime low late last year, and researchers say that it has probably fallen even further since then. A similar index maintained by the Conference Board has dropped 40 points since last autumn, to less than 60 today. Albert Sindlinger, whose Swarthmore, Pa., telephone polling organization takes weekly readings of consumer sentiment, has recorded what he calls the sharpest drop in confidence in 25 years.

Morbid Epidemic. The reasons are clear enough: prices were rising at a compound annual rate of 16.8% in February, much faster than most families' incomes; spot shortages and high prices of gasoline continue to bedevil shoppers despite last week's lifting of the Arab oil embargo; and Watergate has produced a morbid epidemic of doubt about the country's future. "Inflation is no longer the sole reason for pessimistic expectations," says University of Michigan Economist Jay Schmiedeskamp. "At least half of the gloom comes from Watergate and the energy crisis. The Government plays a large role in the economy, and the people have lost faith in the Government's ability."

That sinking in morale is becoming painfully apparent to the nation's merchants. Retail sales in dollars are running only 3.3% ahead of last year's pace, marking an actual substantial decline in the quantity of goods sold because prices have risen 10% since then. Deliveries of new U.S. automobiles are down a shuddering 27%. Consumer loan demand in January was growing less than half as fast as it was last summer, and the savings rate has inched up from about 6% to more than 7% as people start banking more of their paycheck instead of spending it. "The energy shortage should lessen the popularity of shopping as a sport," laments Sumner Feldberg, chairman of Massachusetts-based Zayre discount stores. "We're in for a period of tough retailing." Says Dick Balch, a suburban Seattle Chevrolet-Fiat dealer: "It looks to me as if the economy has just plain stopped."

For many consumers inflation is prompting a reluctant renaissance of pioneer frugality. Mrs. F. Dale Lah of Hampton township, Pa., has begun baking her own bread with store-bought frozen dough and getting by with cheaper cuts of meat by applying more meat tenderizers. "I used to go into a supermarket and buy any brand I wanted, but now I take the one with the coupons," she says. Nessa Forman, arts editor of the Philadelphia Bulletin, has become a paragon of self-control. "I used to think nothing of going into a store and buying a pair of shoes without looking at the price," she says. "Now I look at the price, and I likely walk out the same way I came in--in my old shoes. Spring shopping? Don't make me laugh. I used to buy a couple of steaks a week. Now it's hamburger all the way."

A stay-home mood also is spreading.

Passport applications in January were down 16% from a year ago, and resort reservations in Massachusetts are off 25%. In Atlanta, Jerry and Margaret Sullins have forsworn restaurant meals, and invite friends over for home-cooked dinners instead. "That way we don't feel closed in, and it's cheaper than going out," says Margaret.

Hot Items. That trend is not all bad for retailers. Mail-order sales of Sears, Roebuck, Montgomery Ward and other catalogue houses are surging as more energy-conscious shoppers let their fingers do the traveling. Some store chains report that their long-languishing downtown branches are jammed with customers unwilling to motor to far-flung suburban shopping centers. Department stores report strong sales of books, games, television sets and other aids to a quiet evening at home. Other hot items include furniture, household hardware, seeds and garden supplies, and backyard swimming pools. "People are paying more attention to their homes," explains G. John Doces, president of Seattle's Doces furniture chain. "Home, Sweet Home is back."

The new consumer austerity could go out of fashion very suddenly, especially if gasoline flows as freely as expected with the Arab embargo off. On the other hand, high gasoline prices will continue to inhibit driving, and most economists do not expect inflation and unemployment to abate much until late in the year. So the unseasonable chill on retail sales could last well into the hot-weather months.

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