By and  on October 6, 2009

Holiday retail sales will be down, but not as sharply as last year, according to the National Retail Federation.

The trade organization on Monday predicted holiday sales would decline 1 percent this year to $437.6 billion. That’s well below the 10-year average of 3.39 percent gains, although far better than both last year’s 3.4 percent drop and the 3 percent decline in annual retail sales forecast for all of 2009.

“As the global economy continues to recover from the worst economic crisis most retailers have ever seen, Americans will focus primarily on practical gifts and shop on a budget this holiday season,” NRF chief economist Rosalind Wells said.

The NRF cited “some hopeful signs of a recovery,” such as better-than-expected sales in August and momentum in the stock market. However, consumer uncertainty over job security and declining housing values will take a toll on spending this holiday season. As retailers become even more promotional, certain popular holiday categories like apparel and electronics may experience deflation because of aggressive sales, the NRF said.

“The expectation of another challenging holiday season does not come as news to retailers, who have been experiencing a pullback in consumer spending for over a year,” said Tracy Mullin, NRF president and chief executive. “To compensate, retailers’ focus on the holiday season has been razor sharp, with companies cutting back as much as possible on operating costs in order to pass along aggressive savings and promotions to customers.”

NRF defines “holiday sales” as the November-to-December period at traditional retailers, including discounters and department, grocery and specialty stores. Sales at automotive dealers, gas stations and restaurants are excluded.

Along similar lines, Archstone Consulting forecast that holiday retail sales would decline 1 percent, compared with a 2.8 percent drop last year from 2007, representing the first back-to-back contraction in 40 years.

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