WHY AMERICANS ARE BUYING LESS

ANGERED by rising prices and fearful of future economic tremors, U.S. consumers have turned cautious in their buying habits. They are shopping harder for bargains, postponing some planned purchases of costly items and hesitating about buying on credit. "We see a marked change over the past four weeks," says Ernest Molloy, president of Macy's, echoing a common sentiment among merchants. Caught in a pincers, they feel squeezed both by the rising costs of doing business and by mounting consumer resistance.

The new mood--welcome to Washington's inflation fighters but a source of concern to many businessmen--has been building up for months. The trend of retail sales has been flat almost all year. During the twelve months that ended last July, sales rose less than 2% while prices advanced nearly 4%, meaning that the actual volume of retail trade shrank about 2%. Though retail sales climbed above last year's levels during the latest week reported by the Commerce Department, most of the increase reflected the early introduction of 1970 auto models (see story, p. 93).

Rising Rebellion. Last week TIME correspondents in a dozen cities interviewed 50 large and small retailers--and many of their customers--about the rising rebellion against high prices. Smaller retailers have been complaining for months, while big department stores and chain stores continued to do quite well. Now that pattern may be changing as consumers tighten their purse strings.

"Business is harder to come by," says Saul Zeidman, vice president of Allied Stores. Accordingly, many merchants and manufacturers are revising their advertising to emphasize sound value and cost-savings. For example, Coca-Cola is promoting its 16-oz.-bottle package as the "best buy per ounce" in soft drinks, and Westinghouse Electric stresses "the most refrigerator for your money."

Consumer resistance shows up most sharply in home furnishings and appliances. "We went to four different places before we finally bought a color TV set," says Norma Piel, a Pittsburgh housewife, "and I'm sure that we saved at least $100." Apparel sales are strong almost everywhere, but stores in Los Angeles and St. Louis report a declining demand for shoes, partly because the new styles, which many people consider ugly, have not really caught on. The fur industry is having its shabbiest year in decades; women are not buying as many minks and Persian lambs as in recent years. In Boston, Detroit and other cities, retailers express misgivings about the prospects for Christmas sales; some are trimming their holiday orders.

The resistance movement has spread far and wide. The Pentagon has just announced that it will stop serving beef stew in military mess halls next year because it costs too much to prepare. Instead, troops will get more hamburger or meatballs (which they prefer anyway). In another move prompted by price increases, President Nixon last week asked Congress to raise social security benefits by 10% and to provide for automatic increases in the future geared to the cost of living.

In its latest sampling of the public's buying intentions, the University of Michigan's Survey Research Center found consumer confidence on the wane for the second successive quarter. Professor George Katona's index of consumer sentiment, which is based on interviews with some 1,550 householders and has proved to be an accurate barometer of future retail-spending trends, fell from 95 in February to 86 in September. "That is a sharp decline," said Paul McCracken, the President's chief economist, adding that it is "additional evidence" that people realize that "the economy is beginning to cool off." Pollster Louis Harris found another reason for consumer unease: six out of ten U.S. families feel that they are not living as well as a year ago because inflation and rising taxes have outdistanced the gains in their income.

Downswing in Profits. The consumer's hole-in-the-pocket feeling was only aggravated by last week's report that consumer prices rose at an annual rate of 4.8% in August. Though that was slightly below average for the year so far, prices are still climbing at a rate of 6% per year. As Oklahoma Senator Fred Harris, chairman of the Democratic National Committee, pointed out in an indignant speech, prices of meat, fish and poultry have increased nearly as much in the past seven months as in the previous ten years. Since 1959, the overall purchasing power of the dollar has shrunk to 75-c-.

The slowdown in consumer demand should ultimately force retailers to stop raising prices. The process may take many months, because sellers keep boosting prices to compensate for the higher cost of labor and supplies. But will the consumer's new attitude lead to a dangerous decline in U.S. business? Almost all economists anticipate a downswing in profits and a rise in unemployment. Most analysts, however, figure that the decline will not be severe enough to be called a "recession." M.I.T.'s Paul Samuelson expects what he calls a "minirecession"--six months of no real growth in the G.N.P. Arthur Okun, who was Lyndon Johnson's chief economist, is betting against a full-fledged recession--that is, a sustained decline in G.N.P. His view is shared by the White House. Richard Nixon lost his first bid for the presidency in 1960 partly because of the last U.S. recession. He is the last man who wants to see it happen again.

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