Evening star., 1938-01-02
SHARP RISE SEEN
IN CREDIT SALES
Gain of Insta||ment Buying
Regarded as Factor
in Recession.
BY Cambridge Associates.

BY CAMBRIDGE Associates.
When Leon Henderson, consulting
economist of the w. P. A., predicted a
slump in 1888 or before last April he
stressed significantly the jump in in
stallment sales which had occurred
since 1884. He saw larger and larger
share of workers income teing pre-
empted for payment of goods which
had already been made and soda
substantial share of the Nations buy
ing power sterilized, in effect, from
influencing future production.
Mr.. Hendersons general prediction
has been borne out with distressing
accuracy. Whether the installment
sales premise is sound is something
that economist will long argue over.
The fact remains that inStallment sales
are on the uptrend and nothing in
dicates an immediate reversal in spite
of the belated attempts of credit
managers to keep them within bounds.
In 1925, available statistics indicate
that So per cent Of all retail sales were
made upon an installment basis. In
1929, the pay-as-you-ea bought
7S per cent. Contrary to expectations,
however, the onriIsh of the depression
did not end the steady annual rise in
installment sales figures. In 1880 the
total percentage reached SO and
dropped only 4 to 85 in 1881. The
next year, 1882. found many of the
old installment accounts liquidated
and no tendency on the part of con-
sumers to rush into new commitments.
The percentage of installment sales
dropped to IA and held steady near
this figure through 1888 and 1884.
1888 Brings Big Increase.
1t was in 1885 that the big rush to
buy on installments developed. After
numerous false starts, recovery was ac-
cepted as real. People were receiving
pay envelopes and looking forward
with confidence to next weeks. The
urge to enjoy comforts and luxuries
that the depression had denied them
was strong throughout the consuming
public. 1nstallment purchasing rose
swiftly to 9 per cent of total retail sales.
Nineteen thirty-six brought 25 per
cent increase over these figures and
the uptrend showed no signs of abate-
ment during the early months Of 1887
So much for the record. INSTALL
ment sales undoubtedly increased rap
idly during the past two years due to
many factors. AS mentioned, con-
sumers became confident of the con-
tinuance of recovery and hastened to
satisfy deferred needs. Second. the
pressure OF idle funds made itself felt
In the consumer field through the
growth OF financing companies. In
terest rates were reduced somewhat:
down payments required were cut and
In some cases eliminated payment
periods were extended. Many new
types OF merchandise, including soft
goods" such as clothing, etc, which
were formerly sold for cash or on
open credit, were offered on INSTALL
ment terms.
Markets Widened.
The effect of installment selling on
the national economy is as yet by no
means clear. Certainly deferred pay
ment plans greatly widen markets for
semi durable, relatively expensive ner-
chandise such as automobiles. refriger-
ators, furniture and the like. Without
plans permitting consumers to pay
from income, mass production would
not be possible. Prices would be higher
and there would be net loss in real
income. BY expanding such markets
employment is increased and the ma
tional income spirals upward.
On the other hand, of course. when
a large percentage of workers contract
to pay out sizable percentage of their
incomes for year or more in ad-
vance, there comes point where cur
rent buying ability falls behind pro-
duction: temporarily, at least, in the
lines where installment buying is a
dominating factor, production must
mark time until effective purchasing
power has been restored, either,
through the liquidation of old &C.
counts or through increases in en-
ployment and wage levels.