September 23, 2008 / 4:52 AM / 11 years ago

Holiday sales set for worst gain in 6 years: NRF

NEW YORK (Reuters) - The tumultuous economic climate will constrain U.S. holiday sales growth to its lowest level in six years and a turnaround is not likely until the second half of next year, a leading retail trade group forecast on Tuesday.

Christmas shoppers in a file photo. REUTERS/Fabrizio Bensch

The National Retail Federation expects 2008 U.S. holiday sales, or retail industry sales in the months of November and December, to increase 2.2 percent this year to $470.4 billion.

That would be the paltriest gain since sales rose 1.3 percent in 2002, when a slumping economy, rising unemployment and the threat of a war with Iraq prompted consumers to cut spending.

“Everything is so volatile and so uncertain,” said National Retail Federation Chief Economist Rosalind Wells in an interview on Friday, adding that this year’s holiday outlook was one of the most difficult to assemble in her 13 years of forecasting for the trade group.

“I haven’t experienced a time where I’ve seen ... a crisis like this,” she said.

Wells was developing her holiday forecast during one of the most chaotic weeks in Wall Street history, marked by the failure of Lehman Brothers, the government bailout of insurer American International Group (AIG.N), and Merrill Lynch MER.N agreeing to be acquired by Bank of America (BAC.N).


Even before last week’s Wall Street shake-out, a bleak picture was emerging for the U.S. holiday season, with some predicting sales growth would be the worst since 1991.

While the National Retail Federation forecast is not as dour as that, it can be hard to compare holiday forecasts because the forecasters measure holiday sales differently.

TNS Retail Forward expects 1.5 percent growth for holiday retail sales, which would make it the worst holiday in 17 years. But the research firm defines holiday sales as those taking place during the fourth quarter.

Deloitte, which defines the holiday as November, December and January, expects sales to rise 2.5 to 3.0 percent.

If holiday sales rise less than 2.9 percent, it will be the smallest gain since 1991, according to Deloitte, but they could rise 2.9 percent or more and still be the worst since 2002.

The National Retail Federation said a holiday sales gain of 2.2 percent would fall well below the ten-year average of 4.4 percent holiday sales growth.

“Consumers have been in a squeeze for many months now,” Wells said.

“We continue to see employment declining, the unemployment rate jumping — it jumped a lot in the past month and it will go higher — and real incomes are actually declining because you’ve got the price of basic things like food and energy, which are going up.”

Given those factors, she expects consumers to gravitate toward discount retailers to stretch their dollars this holiday, and she does not expect an economic turnaround until the second half of 2009.

“There are so many indicators that are in recessionary territory already that there is a possibility that we see no growth or slightly negative growth in the next quarter or two into early of next year, and then it takes time for that to turn around,” Wells said.

Editing by Gary Hill

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