Retail Sales Likely to Decline in 2009: NRF

Retailers who thought they had it rough in 2008 are in for even tougher times, according to new sales forecast released by the National Retail Federation.

Sales are expected to dip overall by 0.5% in 2009, the first annual decline reported since 1995 when the NRF began tracking retail sales. The NRF’s forecast excludes automobiles, gas stations and restaurants.

The trade group estimated that retail sales for the first half of 2009 would drop by 2.5%, before improving slightly to a 1.1% third quarter decline, according to the group’s Retail Sales Outlook report.

The fourth quarter takes a more positive turn, with a projected a 3.6% increase in the fourth quarter attributed to the anticipated government economic stimulus plan.

“This downward cycle will not be easy to break,” NRF Chief Economist Rosalind Wells said during a briefing with the media yesterday. “Consumers will continue to spend cautiously.”

Wells said consumers would continue to shift their priorities, shopping at discount retailers and in warehouse club stores to stretch their dollars. Online retailers are expected to fare better than brick and mortar stores, but those retailers will still feel the negative effects of a weak economy, he said.

The NRF has proposed a series of 10 “tax-free” days to give shoppers an incentive to spend money without being burdened by sales tax at a certain spending level. Currently, 17 states have sales tax holidays.

“It’s an incentive to the consumer,” Rachelle Bernstein, NRF vice president, Tax Counsel, said. “It would provide a spur to consumer spending for the short term.”