NEW YORK — Rising fuel prices, along with an expected interest rate increase by Federal Reserve chairman Alan Greenspan this week, could cast a shadow on the upcoming holiday shopping season.

“It will be a double whammy,” predicted Mark Bienstock, executive vice president of DCD Capital, a trade and factoring finance firm based in New York. “Minimum payments on credit cards will increase, as well payments on home equity loans. Those carrying debt — both retailers and consumers — will really be watching their money.”

Interest rates have been at its lowest point in 40 years. Greenspan imposed a quarter-point increase in August, bringing the rate to 1.5 percent. The result has been an increase in prime rates, which is pinching consumers and retailers alike, industry sources said. It’s important to note that Greenspan’s increase didn’t seem like much at the time, but talk of further increases has several factors, asset-based lenders and retail analysts paying close attention.

For the near term, the outlook is stable. Most retailers have already budgeted their fall and winter expenditures. But on the consumer side, some are predicting that shoppers might experience some sticker shock this holiday shopping season. This is because when interest and prime rates climb, the cost of business goes up, which is often passed on to the consumer.

“It will be automatic,” said Kurt Barnard, analyst and president of Barnard’s Retail Consulting Group. “Some may try to absolve the increase, but ultimately, it is the consumer that will be picking up the tab.”

Paying extra at the gas pump is also an ongoing concern. Gasoline prices are at record highs, nearly topping $50 a barrel in August. “Even a dime more for gasoline can determine if a person decides to purchase a new pair of shoes for one of their kids,” Barnard said. “If Americans are paying more at the gas pump, they have less to spend elsewhere.”

Some analysts say the impact of the hike depends on how steep it is. The Fed is expecting to raise rates on Tuesday, but it is unclear by how much.

“It’s been expected,” said Walter Loeb, president of Loeb Associates, a retail analyst group also based in New York. “It’s been a while, and both the consumer and retailer should have prepared for an increase. It just might be more of a psychological impact, but should we hit 2 percent, then I think we will see some serious changes in the current trends.”

This story first appeared in the September 20, 2004 issue of WWD. Subscribe Today.

Long term, the outlook is that discretionary spending may end up declining as prime rates, which drive credit card rates, increase and as consumers continue to dole out more money on fuel.

The analysts said consumers may make basic apparel purchases, such as buying a shirt or bottoms, but splurging on designer handbags or higher-end items might be something they put off.

For the fourth quarter, there’s a little bit of optimism mixed with some cautionary views. “After 2002, it could only get better,” Bienstock said. “That was a bad year, and 2003 showed retailers bouncing back. This year, we’ll all be watching with some caution.”