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Retail Sales To Improve In Second Half: NRF

Retail sales are expected to begin to rebound by the second half of the year, according to a recent economic forecast from The National Retail Federation (NRF).

The trade group’s quarterly Retail Sales Outlook report, which projects retail industry revenue (excluding car dealerships, gas stations and restaurants), forecast a 3.6 percent increase in fourth-quarter sales due to a strengthening economy and easy year-over-year comparisons.

Sales declines will begin to slow in the third quarter, when retail revenues will decrease just 1.1 percent, the report said.

In the meantime, first-half sales are expected to decline 2.5 percent as last year’s economic weakness carries into the first six months of 2009 and consumers continue to shift their spending priorities.

Total 2009 sales are projected to slip 0.5 percent, according to the NRF forecast.

“Most of the consumer behavior we saw in 2008 will continue well into this year,” said NRF chief economist Rosalind Wells. “Shoppers will be seeking value and trading down to discount and off-price retailers in order to stretch their purchasing power.”

Indeed, a pair of economic reports released last month by the Consumer Electronics Association (CEA) and the Conference Board showed that consumer confidence continued its downward slide in January, driven largely by job insecurity.

The CEA report, produced in conjunction with CNET, indicated that consumer confidence slipped 1.3 points from December and is down 4.2 points from January 2008.

Not surprisingly, the report also showed that consumers are less likely to spend money on CE and other technology products, although the decline in their propensity to do so was more modest. According to the CEA-CNET Index of Consumer Technology Expectations (ICTE), consumer confidence in tech devices decreased 1 point from December, representing 2 percent decline year-over-year.

“Consumer confidence continues to decline despite the enthusiasm around the recent shift in administration,” said CNET research director Claudia Haase. “It is clear that consumers continue to worry about job losses, a volatile stock market and a deepening recession.”

Haase suggested that national attention on CE during the recent International CES may have bolstered the ICTE numbers.

“Some of the biggest events in consumer electronics kicked off in January such as the International CES, which fueled consumers’ interest in the hottest tech gadgets,” she said. “But the index decline reflects that while consumers are still shopping for electronics, they are more selective in their purchases.”

Separately, the Conference Board Consumer Confidence Index, based on a representative sample of 5,000 U.S. households, inched slightly lower in January and continues to hover at historic lows.

“It appears that consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008,” said Lynn Franco, Conference Board Consumer Research Center director.

“The minor change [from December] suggests that economic conditions did not deteriorate significantly further in January but, on the other hand, they did not improve either. Looking ahead, consumers remain quite pessimistic about the state of the economy and about their earnings. And, until we begin to see considerable improvements in the Expectations Index, we can’t say that the worst of times are behind us.”

Consumers’ assessment of overall current conditions remains pessimistic. Those who said business conditions are “bad” increased to 47.9 percent from 45.8 percent, while those who said business conditions are “good” declined to 6.4 percent, from 7.7 percent last month, the Conference Board reported.