Forecast: Group Sees 2011 Retail Sales Up 4%

NEW YORK - The nation's largest retail trade group says it expects retail sales to rise 4 percent this year, the biggest increase since 2006, but shoppers are likely to remain cautious as they cope with slow job growth and rising prices.

The National Retail Federation said Thursday that it expects retail sales to reach $2.47 trillion in 2011, up from $2.37 trillion in 2010, excluding automobiles, gas stations and restaurants.

That increase would be higher than the past decade's average annual growth rate of 3.1 percent and 2010's increase of 3.7 percent. But even the 4.7 percent increase in 2006 is below the 5 percent rate that signifies a robust economy.

"Consumers will continue to be thoughtful about what they're spending, but they're certainly feeling better," said Jack Kleinhenz, NRF's chief economist.

NRF's forecast follows a robust holiday shopping season in November and December, when total retail sales rose 5.7 percent. That's on top of a 2.3 percent gain in the previous holiday period, compared with the 2008 holidays.

The annual increase NRF predicts would be the second in a row following a rare decline of 2.7 percent in 2009 compared with 2008 as a whole. The trade group's figures are not adjusted for inflation, and they include online sales from physical stores but not from companies like Amazon.com that operate only on the Web.

The Social Security tax cuts that went into effect last month should put more money in people's pockets, and a rallying stock market is encouraging, particularly for the wealthy, who tend to respond more to Wall Street because they have more invested there.

But economists don't expect consumers to maintain the holidays' pace of growth with the housing and job markets still so weak. Already in January, the growth in spending slowed compared with a year earlier, due in part to a series of snowstorms. Spending rose 3.5 percent from January 2010, according to the trade group.

Among the pressures consumers face are rising costs for food and clothing as companies cope with higher prices for commodities like cotton and higher labor costs in China. Also on the rise are gasoline prices, which reached a 28-month high Wednesday even though oil and gas supplies in the U.S. continue to grow and demand is weak.

At the mall, shoppers already can see prices creeping up, though the biggest increases will come later this year.

"We know we're going to be increasing ticket prices. We have to," CEO and Chairman Mark Jeffries of teen stalwart Abercrombie & Fitch Co. told investors during a conference call Wednesday. "We're comfortable that we can pass some of these increases on to the customer. We're not comfortable with how much."