Holiday sales are expected to grow at the slowest pace in six years as shoppers worry about jobs, the housing and stock markets and high gas and food prices.
That's according to a forecast from the National Retail Federation being released today.
The trade group's outlook joins other weak holiday predictions issued so far that will likely lead to aggressive discounting and pre-Thanksgiving sales blitzes as stores try to pry dollars from frugal shoppers.
Merchants have also scaled back holiday inventories and seasonal sales staff from a year ago. The challenges are compounded by a holiday season that has five fewer days between Thanksgiving and Christmas Day than in 2007, which could make consumers delay their buying.
“You don't have a good picture,” said Rosalind Wells, the NRF's chief economist. She said she doesn't expect an economic turnaround until the second half of next year.
The Washington-based trade association predicted that total holiday sales will rise a modest 2.2 percent for the November and December period from a year ago, to $470.4 billion. That would be below the ten-year average of 4.4 percent holiday sales growth and a bit below the 2.4 percent gain last year. It would also be the slowest pace since 1.3 percent in 2002.
Total retail sales figures from the NRF exclude business from auto dealers, gas stations, and restaurants. The estimate also excludes online sales and reflects last week's financial turmoil, Wells said.
Two other forecasts, from Deloitte LLP and TNS Retail Forward, that were made before the recent market turbulence had predicted the weakest holiday growth since 1991 – though they use different metrics.
Deloitte LLP expects total holiday sales – excluding motor vehicles and gasoline, but including online sales – to rise 2.5 percent to 3 percent in the November-through-January period, less than last year's 3.4 percent gain. A rise of 2.5 percent to 2.8 percent in that period would be the smallest gain since 1991, Deloitte noted.
TNS Retail Forward, a global market information group, sees retail sales rising 1.5 percent in the October-through-December period, the weakest performance since 1991.
The downbeat forecasts come as many retailers have already suffered from a weak fall shopping season.
While autumn selling isn't a predictor of holiday sales, it's seen as a barometer of consumers' willingness to spend. And right now, shoppers don't seem to feel generous.
Stores are closely monitoring what's happening on Wall Street. Any more upheaval could lead to stores' retooling their plans, including hiring. Holiday hiring is already likely to fall significantly short of last year's total, which was the lowest since 2003, according to job placement consulting firm Challenger, Gray & Christmas.
Given the anemic environment, Wells expects discounters to keep faring well as shoppers focus on price.
Joshua Thomas, a spokesman for Target Corp., which has been hurt in this weak economy because of its emphasis on nonessentials such as trendy jeans and housewares, said the chain is focusing on gifts under $25.
Mall-based apparel stores will likely keep struggling, as shoppers cut back on discretionary spending or shift their buying to stores such as T.J. Maxx, which offers major brands at discounts.
Analysts are closely monitoring luxury stores, whose sales have slowed in recent months. Goldman Sachs analyst Adrianna Shapira noted in a report last week that New York City's luxury flagships are unlikely to remain bright spots amid Wall Street's turmoil.
“The slowdown will undoubtedly ripple beyond NYC to impact others tied to high-end spending such as Coach, Nordstrom and Ralph Lauren,” Shapira wrote.