Weak holiday sales expected

Inflation fears could subside

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New York (CNNMoney.com) -- The struggling economy should hurt the holiday shopping season according to Deloitte & Touche. The New York company forecasted the 2008 shopping season will only see a 2.5% to 3% increase this year.

Last year Deloitte predicted a 3.4% increase in holiday retail sales, while sales actually increased 3%. If the consultant firm's predictions are accurate, this year's sales could see the smallest increase since 1991, when holiday sales, which are measured from November to January, increased by just 2%.

Higher energy and food prices will be partly to blame, according to Carl Steidtmann, chief economist with Deloitte Research since that means consumers will have less money to spend. Another factor is the mortgage crunch that's limiting the ability of people to refinance and take cash out of their homes in order to shop for the holidays.

"In addition ... rising unemployment claims and a volatile stock market are negatively affecting consumers' perceptions of the economy, their wealth, and their ability to spend," Steidtmann said in a press release.

"In all, these factors will likely lead to a challenging holiday season."