U.S. holiday sales seen up 2.8 percent - NRF

* Nov.-December sales seen up but much less than in '10

* NRF sees $465.6 billion in sales during U.S. holidays

By Brad Dorfman

Oct 6 (Reuters) - U.S. retailers should see a 2.8 percent increase in year-end holiday sales, the largest retail trade association forecast on Thursday, becoming the latest group to expect tepid sales gains for the season.

The 2.8 percent increase to $465.6 billion compares with a 5.2 percent increase in November and December sales in 2010, the National Retail Federation said in its annual holiday forecast.

Higher gasoline and food prices, sputtering job growth and a volatile stock market are all factors that could hurt consumer spending during the holiday season, when many retailers book a big chunk of their profits.

With consumer spending accounting for about 70 percent of U.S. economic activity, the holiday season could also give a signal as to whether the U.S. economy is heading into a double-dip recession.

"This is not going to be the sort of recovery from a recession that we have seen in the past," NRF President and CEO Matthew Shay said. "This is going to be something we've got to work off and deleverage and put people back to work over multiple years."

The 2.8 percent estimate is still slightly above the 10-year average of up 2.6 percent, Shay said. That average includes a 4.4 percent decline in 2008 and 0.4 percent dip in 2009.

Retailers are better prepared for slack demand than in 2008 and 2009, when deep discounts sapped profits, Shay said.

Consumers still expect discounts during the holiday season, but with inventories leaner, retailers can stick to planned promotions rather than having to drop prices to clear out unsold goods, he said.

Other forecasts in the past several weeks have also painted a picture of retail sales increases that might not even keep pace with inflation. The International Council of Shopping Centers forecast a 2.2 percent increase for the season, while consulting firm Kantar Retail forecast a 2.8 percent increase. [ID:nS1E78K04Q]. The U.S. consumer price index was up 3.8 percent in August from a year earlier, according to the Labor Department.

Retail stocks have still outperformed the broader market this year. The Standard & Poor's retailing index .RLX is down 2 percent, while the S&P 500 .SPX is down 9.5 percent.

As for consumers, most are likely to balance desire with utility when making holiday purchases this year in areas like apparel, where rising cotton costs months ago have led to increased prices, Shay said.

"People will try to find something that will both double as something they really need and something that is going to be a holiday item," Shay said. (Reporting by Brad Dorfman in Chicago, editing by Bernard Orr)