Retail group forecasts 3.4% rise in sales

The nation’s largest retail trade group expects a solid 3.4 percent increase in sales this year, below last year’s 4.7 percent increase as job woes weigh on shoppers.

Sales should reach $2.53 trillion in 2012, up from last year’s $2.45 trillion, boosted in part by higher prices across all goods, according to a report Monday from the National Retail Federation.

The 3.4 percent bump would still outpace the 10-year annual average increase of almost 3.1 percent and would also mark a third consecutive year of recovery for consumer spending. Sales slumped 3.5 percent in 2009 with the nation still deep in recession.

However, sales remain well below the more robust figures of 5.5 percent or more that the country would typically see in better economic times.

“The forecast is a reflection of the economic conditions. Things have gotten modestly better, but we still have a long way to go,” said Matthew Shay, president and CEO of the retail group, based in Washington, D.C.

The retail sales forecast, which does not include autos, gas and restaurants, was shaped by a variety of economic headwinds. Consumer confidence, while rising, is still below what would be considered healthy.

The unemployment rate fell to its lowest level in nearly three years in December. But it’s at a high 8.5 percent. And those who have held on to jobs are seeing paltry wage gains that are not keeping up with the rising costs of everything from food to clothing.

Also, significantly, home values have yet to recover, with foreclosed properties dragging down prices everywhere.

Consumer spending accounts for 70 percent of all U.S. economic activity. And concerns are growing after a holiday season that produced solid sales increases but was marred by heavy discounting to get shoppers to spend. Merchants may have to keep cutting prices and also come up with new ways to get shoppers to spend.

Sales for the November and December period, which account for as much as 40 percent of total annual sales, rose a better-than-expected 4.1 percent, according to NRF’s measure, but business stalled in December.