NEW YORK (CNN/Money) - Higher energy costs, lackluster job and income growth and a big jump last year will result in only moderate growth in 2005 retail sales, according to a study released Monday.

The National Retail Federation said retail sales should grow by 3.5 percent in 2005. In 2004, the trade group said retail sales grew by 6.7 percent, the highest growth since 1999.

"This year, consumers will be under increased financial pressure due to higher energy costs and slow wage growth," NRF Chief Economist Rosalind Wells said in a press release. "Additionally, past stimuli provided by tax cuts and very low interest rates will no longer be there to boost consumer spending."

The report points to sluggish growth in the labor market as underlying the lack of disposable income.

"The labor market will continue to expand this year, though our concern is that modest employment growth will lead to modest income growth, which will put a financial strain on consumers," Wells said.

Discount retailers are expected to feel the brunt of this squeeze, as slow income growth and fixed costs like energy take a bigger percentage of their customers' paycheck.

Purveyors of luxury goods, on the other hand, are poised for a solid year as their customers are less affected by slow income growth and a weak dollar boosts demand in overseas markets.

The quarterly report measures growth in "GASF" retail sales, which is sales in general merchandise stores, apparel stores, furniture and home furnishings stores, electronics and appliances stores, and sporting goods, hobby, book and music stores.

For the first quarter of 2005, the report predicts retail sales to grow by 3.7 percent compared to last year's booming 9.9 percent rate.