Heavy Consumer Debt May Trim Holiday Sales Some Shoppers Have Reached Their Credit Limit, Can’t Spend More

To hear many Wall Street economists tell it, the American economy is in great shape - a slam-dunk for strong holiday sales and profits for retailers.

But when consumers draw up their holiday shopping lists, many will ignore economists’ pronouncements about gains in employment, wages and net wealth, and even the closely-watched consumer confidence readings.

These economic statistics may be flashing a big green light, but around the kitchen table, many families are seeing yellow, if not red. They’ve already run up big balances on their credit cards, and they don’t want to, or can’t, charge any more.

Consumers may have a surprise in store for retailers and economists, who are counting on Americans to shop ‘til they drop.

“We had better have a good Christmas this year,” said Mark Vitner, an economist at First Union Corp. in Charlotte, N.C. “The overall level of retail inventories is still fairly substantial.” Such entreaties fall on deaf ears in some households. Norma Lowe, of Phoenix, is nearly finished paying off $30,000 in credit card debt, including $3,000 for a wide-screen television purchased for her parents for Christmas 1990.

The past four years, the 30-year-old clerk at the Arizona State Senate has bought fewer and much less expensive gifts, and paced herself by buying them on sale throughout the year. And she makes things at home for under $5.

“Sometimes you get what you can afford, even if it’s not exactly what you want,” Lowe said. Paying off her debt “has been life-changing thing for me.”

Lowe’s lifestyle adjustment - and that of millions of other consumers like her - is not necessarily reflected in the ebullient statistics churned out by the government and private economists.

Unemployment is low at 5.1 percent. Job creation is strong, although some argue that the new jobs are too low-paying to give the economy much of a boost. Take-home pay, after subtracting for inflation, is up.

Consumers’ confidence, viewed by many as a crucial measurement of their propensity to spend, hit a five-year high in August and has given back very little since then.

But that wealth and optimism are not producing more spending at the stores.

“I thought we may be looking at the best Christmas in three or four years,” said Raymond Worseck, chief economist for A.G. Edwards & Sons Inc. in St. Louis.

“And then all of the sudden in the last three to four weeks, I’ve seen rather soft numbers coming out.”