NRF Sees U.S. Retail Sales up 3.5% in 2005

Consumer spending will boost the U.S. economy again this year although to a lesser extent than in 2004, according to the National Retail Federation (NRF).

The NRF predicts that GAFS sales (general merchandise stores, apparel stores, furniture and home furnishings stores, electronics and appliances stores, and sporting goods, hobby, book and music stores) will increase 3.5 percent from last year.

GAFS sales grew 6.7 percent in 2004, the highest retail sales growth since 1999.

For the first quarter, the NRF is predicting growth of 3.7 percent compared with a 9.9 percent jump in the same quarter of 2004.

The group added that retail sales will be held back this year for a variety of other reasons. "This year, consumers will be under increased financial pressure due to higher energy costs and slow wage growth," said NRF Chief Economist Rosalind Wells. "Additionally, past stimuli provided by tax cuts and very low interest rates will no longer be there to boost consumer spending."

The luxury sector, however, is expected to thrive this year because high-income families are less affected by slow income growth and higher energy prices. In addition, the weaker dollar is increasing the demand for luxury purchases by tourists.