Holiday sales seen slowest pace in 5 yrs

By Nicole Maestri

NEW YORK (Reuters) - Holiday sales are expected to rise at their slowest pace in five years as the weak housing market and a credit crunch temper consumer spending, the National Retail Federation said on Thursday.

Total holiday retail sales are forecast to rise 4 percent to $474.5 billion this year, the trade group said.

That would mark the slowest holiday sales growth since 2002, when sales rose 1.3 percent, and it would fall below the ten-year holiday sales average of a 4.8 percent increase.

"Retailers are in for a somewhat challenging holiday season as consumers are faced with numerous economic obstacles," said NRF Chief Economist Rosalind Wells in a statement. "With the weak housing market and current credit crunch, consumers will be forced to be more prudent with their holiday spending."

The holiday shopping season is crucial to retailers as it can bring in anywhere from 20 to 25 percent of their annual sales during November and December, according to the NRF.

Many retailers have already warned the second half of the year will be more difficult than the first as consumers confront a weaker housing market, higher fuel and food costs.

During the housing market boom, which ended about 18 months ago, millions of homeowners took out home equity loans, helping to boost their spending.

Last year, holiday sales rose 4.4 percent, which was below the NRF's initial forecast of a 5 percent gain, as unseasonably warm weather and the slower housing market crimped spending.

In 2005, U.S. holiday sales rose a healthy 6.1 percent to $435.6 billion.

Retailers like Nordstrom Inc (JWN.N) and Saks (SKS.N) might buck the trend. The trade group said luxury retailers appear to be a bright spot as their customers continue to spend despite economic head winds.

But discount retailers and some department stores could struggle as customers look to shop at cheaper competitors, the group said.

The NRF defines holiday sales as those which occur in November and December at most traditional retail outlets including discount retailers, department stores, grocery stores and specialty shops.