Post-Holiday Damper Seen on Spending : Economy: Consumers are likely to focus on paying off Christmas debt. How they do so will say much about the recovery in months ahead.

Americans are likely to reduce their spending for the next few months as they pay for their Christmas shopping spree, but the debt hangover is likely to be brief, analysts say.

Citing the increased consumer optimism that pushed holiday spending to a four-year high, Northern Trust Co. economist Robert Dieli said: “We’ve seen the mood improve since Labor Day, and there is no reason to expect the improvement won’t continue.”

Consumer spending is important because it accounts for two-thirds of economic growth. While consumers are not likely to pick up the torrid pace of the holidays, continued spending at a modest clip could give the economy the spark it needs to begin a steady recovery.

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A stunning run-up in credit card use helped give the nation’s retailers their best Christmas season in four years. Visa U.S.A. said its charge volume grew by 17% during the holidays, while Mastercard said its volume expanded by 18%, a five-year record.

The nation’s retailers also reported large gains. Sears, Roebuck & Co., the nation’s largest retail card issuer, said its charge volume gains were in the low-double digits.

Lynn Reaser, economist with First Interstate Bank in Los Angeles, said consumers are likely to cut back during January as they try to pay off credit card balances to avoid stiff interest charges. Skimpier tax refunds, resulting from a change in taxpayer withholding last March, will further dampen spending in the early part of 1993, Mellon Bank economist Russell Sheldon said.

While spending will drop somewhat, few anticipate the sort of declines that have haunted the nation’s retailers and hampered economic gains over the last two years.

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Sears officials do not expect a large overall drop in consumer spending. Noting a surge in sales of washing machines and other durable goods that are normally paid for over time, Sears believes that consumers are ready to take on more debt after two years of belt-tightening.

Credit card industry analyst Robert B. McKinley contends that despite the furious surge in holiday volume, consumers did not add that much to their overall credit balances. He estimates that the average balance increased a manageable 3% in 1992 to $1,225.

And other analysts point out that some consumers undoubtedly used credit cards as a substitution for cash during the holidays to take advantage of an unprecedented number of contests and promotions offered by card issuers. These obligations are likely to be quickly paid off.

Of interest to the nation’s economic pulse-takers is how Americans will pay their bills: from savings or income. Which source consumers draw on most has much to say about the strength of the economic recovery in the months ahead.

With consumer spending driving two-thirds of economic growth, the method is critical. If consumers must dip into savings to pay credit card bills, they will almost certainly cut back on new purchases. Consumers who can cover their obligations out of current income are less likely to cut back.

Among the pessimists is Jerry Mason, a professor of consumer economics at Texas Tech University in Lubbock. He said that neither savings nor incomes are adequate to pay the bills. “The only place where the money is going to come from is from less spending this year,” said Mason, who foresees slow economic growth as a result.

Others, including First Interstate’s Reaser, believe that consumers will rely primarily on current income, which is up 3% overall from the beginning of last year.

Government statistics and private economic indicators don’t provide clear clues as to how Americans plan to pay those bills.

The government reported that incomes continued to grow in November, enhancing the ability of employed Americans to spend. At the same time, consumer confidence scored significant gains in December, rising to its highest level since the Persian Gulf War, another upbeat sign.

But countering the good news is continued evidence that households are dipping into savings, a sign that spending is outstripping income. The government reported that savings fell in 1992’s third quarter to 4.6% of disposable income from 5.3% in the second quarter.

But some economists do not see the dip in savings as bad news. Dieli of Northern Trust Co. argues that the dip in the savings rate does not mean consumers are breaking into their nest eggs. He said consumers saved a portion of that money in the past only because they were reluctant to spend it.

“It is not savings in the traditional sense,” he said. “It is coming out of the underspending,” or spending postponed until the nation’s economic prospects improved.

Robert F. Wescott, senior economist with the WEFA Group in Philadelphia, said temporary savings declines usually precede economic recoveries as consumers begin to spend again. “I’d be more worrisome if we didn’t see a savings dip,” he said.

The larger question, Wescott said, is whether the burst of Christmas spending was significant enough to cause employers to rebuild inventories of clothing, furniture and other consumer goods. An inventory buildup would trigger new hiring, which in turn would fuel more spending, he said.

“I think that there is a significant chance that that may happen,” said Mellon Bank’s Sheldon.