By  on October 6, 2011

The National Retail Federation is projecting a sharp drop in 2011 holiday retail sales gains to 2.8 percent versus 5.2 percent in 2010, as the consumer mood and economic outlook sours.

Total holiday sales are seen increasing to $465.6 billion, compared with $453 billion last year.

The NRF said holiday 2011 would be “average” for retailers, after last year’s better-than-expected season, though gains were easier to come by a year ago because of depressed figures from 2009.

“Last year, it felt more like we were on the way to recovery. This year it feels different. There’s a question as to whether we are headed to a recovery or not,” Matthew Shay, NRF president and chief executive officer, told WWD.

However, Shay said retailers with “strong promotions and lean inventories” planned are “better prepared” to handle consumer uncertainty than they were in 2008 and 2009 when sales fell.

He said consumers, too, are in a better place, with less debt, increased savings and more product and price information through emerging online sources and social media networking “empowering” them to make wiser purchase decisions.

“Consumers have more access to information than ever,” Shay said. “They’ve figured out how to prioritize their shopping and make smart decisions and will be shopping for “everyday kinds of things that won’t just sit in the closet and have application immediately.”

The NRF noted there’s been 14 consecutive months of retail sales growth and substantial reduction in household debt, which would suggest a stronger holiday season ahead. The trade organization also said the expected 2.8 percent gain is above the 2.6 percent 10-year average. The NRF’s holiday sales figures include sales in November and December at discounters, department stores, grocery stores and specialty stores. The NRF excludes sales at automotive dealers, gas stations and restaurants.

However, continued consumer uncertainty over the stock market, higher gas and food prices, fiscal policy and sputtering job growth are dragging down forecasts.

“Just when you think the U.S. economy is turning around, another factor comes into play that changes the game,” NRF chief economist Jack Kleinhenz said. “How Americans will react to shaky economic data is the question, but the good news for retailers is that shoppers have not yet thrown in the towel.”

The NRF’s holiday sales forecast is based on an economic model including consumer confidence, consumer credit, disposable personal income and monthly sales reports.

The NRF also projected retail Christmas hiring would be essentially flat, with 480,000 to 500,000 seasonal workers compared with 495,000 seasonal employees hired last year. Since last August, the retail industry has added nearly 100,000 jobs, the NRF said.

Despite the projected slowdown in holiday sales, U.S. retail stocks gained ground Wednesday as markets rallied on word that European Union officials were hammering out a plan to recapitalize the region’s banks.

The S&P Retail Index gained 1.4 percent, or 6.83 points, to 499.02 as the Dow Jones Industrial Average rose 1.2 percent, or 131.24 points, to 10,939.95. The fashion gainers included Urban Outfitters Inc., ahead 4.5 percent to $23.49; Aéropostale Inc., 4.1 percent to $11.71; VF Corp., 2.1 percent to $126.18, and Tiffany & Co., 1 percent to $62.58.

In Europe, Frankfurt’s DAX soared 4.9 percent, Paris’ CAC 40 advanced 4.3 percent, Milan’s FTSE MIB closed up 3.9 percent while London’s FTSE 100 rose 3.2 percent.

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