How Much Prosperity?

How long will the postwar boom last? The rosy estimates of three to five years have been based on one solid economic fact. During the war, U.S. consumers piled up $90 billion in savings, now hold $130 billion. This huge hoard, according to the economic witch-doctors, would be poured out-to fuel the boom. But last week, in a gloomy and significant report, the conservative U.S. Bureau of Agricultural Economics said "Not so."

In the June Federal Reserve Bulletin, BAE reported what it had found in a representative survey of 3,000 spending units (all the members of a family living together, pooling their income for major expenditures) in the nation. On the basis of its survey, BAE made some startling estimates for the entire U.S. Most significant: the 50,000,000 people living on the lowest salaries, who had been counted on to do much of the buying, have only 1 % of the savings. And they plan to hang on to most of them.

Who Has the Money. In 1945, those in the top fifth of the salary brackets received almost half the national income, said BAE. Moreover, this same top fifth already held three-quarters of the savings and liquid assets. The bottom 40% had saved only $1 billion during the war. More than 50% having bank deposits decided not to touch their holdings this year except for emergency use.

Who Wants the Goods? How big, then, is the postwar market? BAE estimated that only about 2.8 million people definitely intend to buy cars in 1946; another million will probably buy. Another 2.6 million plan to buy a house this year; a half million will probably buy one. But they plan to pay only $5,020, a price few houses are selling at. For other consumer durable goods, 9.9 million consumers expect to spend $320 each ($3 billion in all). But they expect to spend only about 25% from liquid assets; of the rest, 40% will come from current income; 35% from borrowing.

The prime point, that consumers planned to finance purchases from current income and instalment buying, was already proving true. In April, charge accounts were up 40% over a year ago.

Actually, the picture was not all dark. Those in the low income brackets were able to expand instalment buying rapidly because they had paid up so many of their debts during the war. Even without savings they can buy many things they formerly had to do without.

Nor was the survey able to find out how much cash was tucked under mattresses and other favored "banks" of low income groups. Nevertheless, the survey might well cause businessmen to revise drastically their estimates of the size of the market, the length of the boom. If BAE was right, and the bulk of the cash was held by a comparative few, then the boom might run out of gas earlier than most economists anticipated.

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