Retail sales are projected to increase a modest 4.7 percent this year, much less than the 6.1 percent gain in 2005 as higher energy prices, a still shaky labor market and a slowdown in the housing market dampen spending, the National Retail Federation said Tuesday.
In an address to retailers on the second day of the industry's four-day annual convention, Tracy Mullin, CEO of the world's largest retail trade association, said merchants face "myriad challenges" as consumers struggle to find new sources of spending power as home equity refinancing slows.
The association also noted that the retail industry needed solid employment growth in 2006 to sustain healthy wage and salary growth, key factors in consumer spending.
Several categories of specialty retail will be expected to maintain "solid" growth this year, according to the federation: clothing and accessory stores, including those for shoes and jewelry; food and beverage retailers; and health and personal care retailers.
Last year's biggest winners will continue to show gains, the federation said, but their growth will be more modest. Among those categories: building materials, warehouse clubs and electronics.
"Electronics retailers should be able to sustain strong demand for their merchandise as product excitement and attractive pricing will lure consumers," the federation said.
Rosalind Wells, the federation's chief economist, said that in the first quarter, total retail sales should increase 5 percent compared to a year ago. That would be less than the 6.5 percent gain achieved in the fourth quarter of 2005.
Total retail sales exclude business from auto dealers, gas stations and restaurants.