Shoppers may take a break
Industry group forecasts sales growth to slow to 4.7% in '06; cites energy costs, housing softness.
NEW YORK (CNNMoney.com) - Higher energy costs and a slowing housing market are the two key factors that will pressure consumers to retrench spending in 2006, causing a slowdown in overall retail sales growth, according to the National Retail Federation's annual industry forecast released Monday.
The NRF expects retail sales, excluding autos, gasoline and restaurants, will increase 4.7 percent from last year, much softer than last year's 6.1 percent gain.
In its quarterly Retail Sales Outlook Report, the group cited tough comparisons, rising energy costs and a slowdown in the housing market for this year's subdued outlook.
American consumers for the past several years have proven to be extremely resilient to economic headwinds, and they've also been spending more than they earn. The savings rate has plummeted to an all-time low and is now in negative territory.
How did consumers manage this?
"It is obvious that the spending power came from something else besides wages and salaries," the group said in the report. "Much of the answer lies in the housing market."
"With the housing market beginning to slow, consumers will be challenged to find new sources of spending power," NRF chief economist Rosalind Wells said in a statement. "The strong retail sales we saw in the second half of 2005 will be replaced by more conservative spending in the New Year."
Despite its cautious outlook, it still expects sellers of clothing, footwear, jewelry and health and personal care products to "achieve solid sales growth" in the 4-5 percent range.
Electronics should remain a hot category as prices on must-have items like flatscreen TVs and home theater systems come down.
But home-building outlets and furniture sellers could lose momentum as housing activity slows, the NRF said.
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