Holiday retail sales projected to drop

For the second straight year, the National Retail Federation is predicting a year-over-year drop in holiday retail sales.

The federation, which represents more than 1.6 million U.S. retailers, predicts a 1 percent decline in holiday sales this year compared to 2008, down to $437.6 billion. Holiday sales are defined as any retail purchase made in November or December.

The decline starkly contrasts the 10-year average of 3.4 percent holiday growth, but it's not as drastic as the 3.4 percent year-over-year drop in 2008 or the expected 3 percent decline in retail sales for all of 2009.

NRF expects continued consumer uncertainty about employment and housing values to hamper holiday spending, combined with potential deflation in popular holiday spending categories, such as apparel and electronics, due to aggressive sale prices.

"The expectation of another challenging holiday season does not come as news to retailers, who have been experiencing a pullback in consumer spending for over a year," said NRF President and CEO Tracy Mullin in a news release. "To compensate, retailers' focus on the holiday season has been razor-sharp with companies cutting back as much as possible on operating costs in order to pass along aggressive savings and promotions to customers."

The organization does point to some encouraging signs, including better-than-expected retail sales in August and momentum in the stock market, which could help cushion the blow of lower sales figures.