NEW YORK (Reuters) - U.S. retail sales in 2008 are forecast to rise at their slowest pace in six years as consumers battle higher energy costs, fallout from the housing slump and sluggish employment and income growth, the National Retail Federation forecast on Monday.
By Nicole Maestri
NEW YORK (Reuters) - U.S. retail sales in 2008 are forecast to rise at their slowest pace in six years as consumers battle higher energy costs, fallout from the housing slump and sluggish employment and income growth, the National Retail Federation forecast on Monday.
The trade group expects retail industry sales, which exclude automobiles, gas stations and restaurants, to increase 3.5 percent from last year. That would be the lowest growth since 2002, when sales rose 3 percent.
"We don't know whether it will be a recession or not," said NRF Chief Economist Rosalind Wells in an interview regarding the forecast for 2008. "It's just not going to feel good to anyone."
!ADVERTISEMENT!Economists are debating whether the U.S. economy will slip into recession this year as the weakest housing market in years takes a toll on construction, consumer spending and credit markets.
Meanwhile, record high energy prices and volatile financial markets have prompted a growing number of analysts warn that the economy is near or in a recession.
Wells said she expects sluggish first-half sales to give way to stronger sales in the third and fourth quarters. Industry sales are forecast to increase 3.2 percent in the first half of the year, followed by a 3.8 percent increase in the second half.
Sales of big ticket items, like furniture, will face pressure in 2008, while popular electronics may fare better, she said.
Apparel should have "average" year, Wells said, unless a big fashion trend hits.
"Even the luxury retailers are starting to feel like their customers are holding back a little bit," she said.
Luxury retailers have been on a roll for the past few years as higher-income customers continued to spend despite rising gasoline and food prices.
But the sector is beginning to show some cracks amid an uncertain economic environment.
On Friday, upscale jeweler Tiffany & Co <TIF.N> cut its fiscal-year earnings outlook after same-store sales fell 2 percent in the United States during the November-December holiday period.
"Consumers will be buying less discretionary items and more of the staples," Wells said. "They're going to be more practical."
(Reporting by Nicole Maestri; editing by Gary Crosse)
