NRF predicts 4.8% retail sales increase in '07

CHICAGO (MarketWatch) - Consumers are expected to keep their spending in check this year, leaving U.S. retail sales 4.8% higher, the slowest year-over-year gain in five years, the National Retail Federation said Tuesday.

The Washington trade association expects the economy to slow in the first half before revving up in the second half. That's the reverse of what happened in 2006, when retail sales climbed 6.3% amid an economic slowdown in the second half. That reflected slower new-home building and home resales combined with higher energy costs and tepid employment growth.

"This year, slow economic growth will be reflected in moderate consumer spending and retail-sales gains," said Rosalind Wells, NRF's chief economist. Her projections do not include sales of autos or receipts at gas stations and restaurants.

She's expecting the retail trends most prevalent in recent years -- luxury retailers doing well compared with those catering to low- and middle-income consumers - to repeat themselves this year.

Online shopping will snare even more customers, the NRF said. ComScore Media Metrix reported Tuesday that December's online spending surged 26% to a record $24.6 billion.

For the first quarter, the NRF is projecting a 3.8% gain followed by a 4.6% increase in the second quarter. That should tick up to a 5.2% rise in the third quarter and a 5.7% hike in the fourth.

The sharpest decline will show up in sales of building materials and at garden-equipment stores, owing to the housing slump and last year's pattern: Strong 20% gains at the beginning of the year plunged to minus-4.3% by the end of the year.

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