
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, August 16, 1994                   TAG: 9408160093
SECTION: BUSINESS                    PAGE: C-7   EDITION: METRO 
SOURCE: Knight-Ridder/Tribune
DATELINE: WASHINGTON                                LENGTH: Medium

CONSUMER SPENDING ON REBOUND

U.S. consumer spending should rebound modestly in the last half of 1994 after a second-quarter lull, supported mostly by strong economic fundamentals, economists said Monday.

``The outlook is better, consumer confidence is higher, incomes are higher, employment prospects are better'' than they were last year, said Donald Fine, chief analyst at Chase Securities.

However, spending won't reach the overheated pace of the last half of 1993, economists said.

``Consumers have caught up some with pent-up demand on big ticket items and likely will cut back the pace of spending in those areas compared with ... the second half of last year,'' when consumer spending accelerated at an unsustainable 4 percent annual pace, said Allen Sinai, chief economist at Lehman Brothers.

Also, the end of the refinancing boom, which helped finance consumers' spending spree, and higher levels of consumer debt in the aftermath of that, should prevent a major resurgence in consumer spending growth for the remainder of 1994.

The median forecast of analysts surveyed by Knight-Ridder Financial News put consumer spending in the second half of 1994 at a 2.5 percent rate, up from the second-quarter pace of 1.2 percent. The second-quarter data are likely to be revised up a bit, based on recent upward revisions to May and June retail sales data, economists said.

Estimates for second-half consumer spending ranged from 2 percent to 3.9 percent.

Even though much of last year's demand has been satisfied, consumer spending should pick up again, because economic fundamentals still remain favorable, analysts said.

Economists said the second-quarter lull in consumer spending was mostly the result of slower car sales caused by limited supply and should only be temporary. Car sales are expected to rebound, particularly in the fourth quarter of this year, they said.

John McAuley, an economist at Economic Forecasting Services, said rather than step up supply to meet demand, automakers are keeping stocks low until they introduce the 1995 models. Carmakers would rather satisfy that demand with 1995 models than with 1994 models, he said.

by CNB