Heavy Discounting Expected to Lead to 1% Decline in U.S. Holiday Sales

U.S. November and December holiday retail sales are expected to decline one percent this year to $437.6 billion, according to a National Retail Federation forecast released on Tuesday. These sales include traditional retail categories but exclude sales at automotive dealers, gas stations and restaurants.

While this number falls significantly below the ten-year average of 3.39 percent holiday season growth, the decline is not expected to be as dramatic as last year’s 3.4 percent drop in holiday retail sales nor as severe as the 3.0 percent decline in annual retail sales expected for all of 2009.

“As the global economy continues to recover from the worst economic crisis most retailers have ever seen, Americans will focus primarily on practical gifts and shop on a budget this holiday season,” said NRF Chief Economist Rosalind Wells.

Continued consumer uncertainty over job security and housing values will take a toll on spending this holiday season. Retailers in response are expected to become even more promotional, and certain popular holiday categories like apparel and electronics may experience deflation due to aggressive sales.

“The expectation of another challenging holiday season does not come as news to retailers, who have been experiencing a pullback in consumer spending for over a year,” said NRF President and CEO Tracy Mullin. “To compensate, retailers’ focus on the holiday season has been razor-sharp with companies cutting back as much as possible on operating costs in order to pass along aggressive savings and promotions to customers.”