U.S. retail group sees sales rising modestly in 2010

The nation's retailers are likely to see sales rise moderately this year after a rare decline in 2009, according to a forecast to be released yesterday by the world's largest retail trade group.

The National Retail Federation expects sales to rise 2.5 percent in 2010, still well below the 4 percent average annual gain from 2000 through 2008. The outlook, which excludes automobile, gas station and restaurant sales, is in line with other economists' estimates.

Rosalind Wells, NRF's chief economist, said an improving employment picture and housing market should help boost consumer confidence - and sales - but 2010 will bring continued store closings and other challenges.

“It's going to be a long, hard haul,” Wells said. “It won't be a sharp, V-shaped recovery.”

Tight credit and a stagnant job market will continue to temper consumer spending even as the economy recovers, economists said. So stores are likely to continue keeping inventories lean and offer incentives to lure shoppers.

Sales fell 2.5 percent in 2009 and rose only 1.3 percent in 2008, according to NRF.

But the sector is much healthier than in 2008 now that stores have slashed inventory to match lower demand, Wells said. Those reductions helped them avoid the drastic price-cutting that occurred when the financial crisis escalated during the fall of 2008 and consumer activity went quiet.

At the International Council of Shopping Centers, chief economist, Michael P. Niemira, expects annual sales to rise as much as 3.5 percent for 2010, which would be the strongest percentage increase since 2006.

His group's index of 30 major chains showed sales at stores open at least a year fell 2 percent in 2009, the biggest decline in at least four decades. The figure is considered a key indicator of a retailer's health because it excludes the effect of stores opening or closing during the year.

Retailers are encouraged that sales were better than they expected in 2009's holiday season. Sales for November and December rose 1.1 percent compared with a year earlier, according to NRF. The trade group had forecast a 1 percent drop.

Economists will scrutinize retailers' fourth-quarter earnings reports this month and next to assess shoppers' financial health. The economic recovery is partially riding on consumer spending, which accounts for 70 percent of economic activity, according to the federal government.

As measured by the gross domestic product, the economy grew at an annual rate of 2.2 percent in July through September compared with a year earlier. That rise came after four quarters of decreases and was the strongest sign to date that the recession, which started in December 2007, has ended.

Economists expect the Commerce Department's GDP figure, to be released Friday, to show that growth accelerated in October through December. But if unemployment continues to be high, consumers may further cut spending.

The NRF's forecast comes the same day the business group The Conference Board is slated to announce its consumer confidence reading for January.

Economists surveyed by Thomson Reuters expect the index will edge up to 53.5 from 52.9 in December, which would be the third straight monthly increase but still well below the 90 that's considered healthy. A reading above 100 signals strong growth.