5% Holiday Gains Projected in U.S. Retail Sales

On the heels of the strongest holiday season in five years, retailers can expect moderate holiday sales growth this year. According to the National Retail Federation (NRF), total holiday retail sales are expected to increase just 5 percent over last year, bringing November-December spending to $435.3 billion.

In comparison, holiday sales in 2004 rose 6.7 percent to $414.7 billion.

“A combination of many factors, including energy prices, the job market, disposable income, and consumer confidence, will ultimately affect retailers’ sales this holiday season,” said NRF Chief Economist Rosalind Wells.

“Though it might be easy to label gas prices as the make-or-break factor for the holidays, it is crucial for analysts to look at the big picture instead of isolating one economic indicator to project sales.” 

One-fifth of retail industry sales (19.9%) occur during the holiday season, making it the most important time period of the year for the industry. This year, retailers will struggle with tough comparisons over 2004, which will make significant gains more difficult to achieve.

Adding to that the effects of Hurricane Katrina and high prices at the pump play a role in the tempered outlook. However, NRF maintains that steady consumer spending and strong second and third quarter gains indicate potential for a solid holiday season.