NEW YORK (CNN/Money) - Gas prices, tougher year-over-year sales comparisons and eroding consumer confidence are some of the factors that together could dim the lights for merchants during the upcoming holiday shopping period, according to an industry forecast issued Wednesday.

According to the National Retail Federation (NRF), total holiday retail sales are projected to grow by 5 percent over last year to $435.3 billion for the critical November-December shopping season. Holiday sales in 2004 rose 6.7 percent to $414.7 billion.

The two-month period that can account for as much as 50 percent of retailers' total annual sales and profits.

The NRF defines "holiday retail sales" as sales in the months of November and December from traditional retail categories including discounters, department stores, grocery stores, and specialty stores, and exclude sales at automotive dealers, gas stations, and restaurants.

"A combination of many factors, including energy prices, the job market, disposable income and consumer confidence, will ultimately affect retailers' sales this holiday season," NRF chief economist Rosalind Wells said in a statement.

"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," she added.

Tougher comparisons and the effects of Hurricane Katrina also helped to temper NRF's outlook.

However, consumers can expect deep deals earlier than usual this year as retailers' slash prices to bait bargain-conscious shoppers, the report said.

Separately, a report from Ernst & Young anticipates a 6 to 7 percent increase in 2005 retail holiday sales compared to a 8.3 percent increase for the same period last year.

The report cites increased distribution costs resulting from Hurricane Katrina as one factor that will dampen holiday margins for merchants.

At the same time, Ernst & Young retail analyst Jay McIntosh does not expect to see retailers pass these costs on to consumers.

"It will be a challenging holiday season for most retailers, but many have back-up distribution plans and inventories that will help them cope with the effects of Hurricane Katrina.," McIntosh said in the report.

"To bolster traffic and sales, retailers will begin promoting earlier in the season and promote more frequently and aggressively than originally planned," he added.

Higher gas prices could boost Internet sales, he said, while luxury sales should continue to show strength.

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