Not too early for holiday forecasts

Retail Forward is forecasting a 1.5 percent rise in consumer spending in key holiday retail segments during the fourth quarter of 2008. This figure is the lowest increase in 17 years, according to the Columbus, Ohio, market research and consulting firm. Average holiday spending in the same categories rose 2.7 percent in 2007 and 3.8 percent in 2006.

"The holiday sales forecast represents a weakening from modest third-quarter growth as the boost from tax rebates runs out," said Frank Badillo, senior economist for Retail Forward. "The benefit from a letup in gasoline prices will be overwhelmed by the impact of rising unemployment, tighter credit and other hardships on households."

Included in the forecast are the key retail sectors where many holiday gifts are traditionally purchased. Mass retailers and warehouse clubs can expect to see better-than-average sales from bargain hungry consumers, according to Retail Forward, which expects 5.6 percent combined growth from these two sectors.

Home goods, including furniture and home furnishings, are expected to decline 1 percent. Sales at home improvement stores are also forecast to drop 1 percent, due in part to the continued housing slump.

Online sales, which rose 19 percent last holiday season, will only grow 9 percent in the last quarter of 2008, according to Retail Forward.

"The letup in online shopping reflects the spreading impact of the economic downturn since the last holiday season, particularly among upper-income shoppers," Badillo noted. "These shoppers, who are more likely to shop online, have turned increasingly value-focused in recent months as they have felt worse off with regard to investments, home values and other economic measures."