Sep 24, 2008 6:03 AM, PROMO Xtra, By Amy Johannes

The grim outlook for holiday retail sales continued yesterday as the National Retail Federation predicted sales to grow at the slowest pace in six years, according to its latest forecast.

The group projected that total holiday sales would rise by a meager 2.2% for November and December to $470.4 billion. That estimate is half of the ten-year average of 4.4% and just under the 2.4% sales increase from 2007.

It would be the slowest growth since 2002, when sales rose by 1.3%, the NRF said.

“Current financial pressures and a lack of confidence in the economy will force shoppers to be very conservative with their holiday spending,” NRF Chief Economist Rosalind Wells said in a statement. “We expect consumers to be frugal this season and less willing to splurge on discretionary items.”

The forecast is based on retail industry sales for discounters, department stores, grocery stores, and specialty stores, excluding sales at automotive dealers, gas stations and restaurants.

Several economic indicators show the challenges retailers could face this season, including the struggling housing market, rising unemployment, small income gains and high food and energy costs. The NRF said it doesn’t expect an economic turnaround until the second half of 2009.

“Retailers are going to have their work cut out for them this holiday season,” NRF spokesman Scott Krugman said. “The weakened economy will challenge all retailers, even luxury retailers.”

This year, home furnishings will be a challenged area because of the weak housing market, Krugman said. In addition, the NRF said gift card spending could be down as more frugal shoppers choose between buying a full-priced gift card compared to discounted merchandise.

Two bright spots, however, will be in consumer electronics and online sales, Krugman added. Shoppers can also look forward to big promotions around Black Friday to spark sales.

And with a weak economy, more than half (52%) shoppers say they plan to spend less this year on the holidays, a recent survey from BIGresearch found. Some 42% said they plan to spend the same and 21% say it’s too early to tell, Phil Rist, vice president of strategy at BIGresearch. Just 6% said they would spend more this year.

“Consumers are telling us they are getting hit from all sides, from everything from fluctuating gasoline prices to the home crisis,” Rist said.  

Despite the projections, 28.3% of consumers have confidence the economy will be strong in six months. That’s up five points from last month, but down 13 points from September 2007, Rist said.

Other holiday forecasts gave bleak predictions. TNS Retail Forward last week projected a 1.5% sales increase between October and December period, the worst since 1991. Meanwhile, Deloitte LLP predicts holiday sales will rise by 2.5% to 3% from November through January, though still falling short of last year’s 3.4% increase.

Related Article:

Retail Sales to be at Weakest Since 1991: Report

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