Irwin M. Stelzer, contributing writer

YOU DON'T HAVE TO BE a close reader of the business pages to know that the free-spending American consumer gets credit for keeping the American economy from slipping into a serious recession. What is less heralded is just how the supply side of the economy has contributed to the willingness of American consumers to put their hard-earned and easily borrowed dollars to work shoring up the economy.

Start with Wal-Mart, as any discussion of the retail sector must. With revenues of almost $250 billion, it is the world's largest company. As BusinessWeek points out in a recent cover story, "Every week, 138 million shoppers visit Wal-Mart's 4,750 stores; last year, 82 percent of American households made at least one purchase at Wal-Mart."

For President Bush that is both good and bad news. The good news is that Wal-Mart's use of its mass buying power to keep its costs, and therefore consumer prices, low, has made it unnecessary for the Federal Reserve Board's monetary policy makers to worry that low interest rates will trigger inflation. The bad news for the president is that Wal-Mart's purchases account for some 10 percent of America's trade deficit with China, a deficit that manufacturers and trade unions complain is costing American workers their jobs. To cool things down at home, and to head off congressional pressure to impose tariffs on Chinese goods, President Bush will use the Asian Pacific Economic Conference (APEC) later this week to press China to allow its currency to float upwards so as to make its goods less competitive in the U.S. market.

BUT EVEN IF Bush gets what he wants, the increase in retail prices should not be great, given Wal-Mart's power vis-à-vis its major suppliers. So it will continue to dominate the pile-'em-high-and-sell-'em-low segment of the retail market, and keep customers spending.

The emergence of Wal-Mart is not the only revolution on the sell side of the consumer market. The Internet, discounted as a force when the dot.com bust hit the high-tech sector, is finally making an impact on consumer markets. Books and CDs have always been products that webtailers can move. But consumers are now using the Internet for purchases of apparel, something few thought would ever happen. ComScore Networks Inc. estimates that in one month alone 34 million consumers bought more than $500 million worth of clothes at websites, up 44 percent on the previous year.

And another consultancy, Jupiter/Ipsos, estimates that between 16 percent and 25 percent of Americans purchased a product or service online. Which is why Barry Diller's InterActive Corp., which includes the Expedia travel agency, general TV and web retailer HSN, Ticketmaster, and other e-commerce operations, is expecting revenues to rise by 34 percent this year, to $6.2 billion.

Not only must the retail segment accommodate a growing Web segment. It must also find a way of separating increasingly affluent and fickle youngsters from funds that now consist of a lot more than the measly allowances of yesteryear. Youth will be served--and well served--or else. Teenagers last year spent about $120 billion in the shops, about 40 percent of it on clothing and accessories, according to Trevor Delaney, writing in Smart Money. Not for them any item that is "so five minutes ago," meaning that retailers now have to be more fleet of foot than ever to guess just what will strike the fancy of this with-it crowd. That means low inventories, quick adjustments of ad campaigns, and the risk of rack upon rack of discounted merchandise.