2010 holiday retail sales

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Holiday Retail Sales Set to Slide Amid High Unemployment and Low Consumer Confidence

Holiday retail sales - which account for almost 40% of retail revenue, worth $453 billion in sales last year - are in jeopardy.

Consumer spending continues to be restrained by an unemployment rate that has stayed above 9% for 26 of the past 28 months. Furthermore, rising food and gasoline costs, fears of a new recession, the loss of equity from the housing collapse, and mountains of leftover credit card debt have prospective purchasers tightening their purse strings.

And adding to consumers' woes, income fell for the first time in almost two years in August, dropping a seasonally adjusted 0.1%, according to the U.S. Commerce Department.

Now the International Council of Shopping Centers (ICSC) said it expects holiday retail sales to be up 3% this year, down from the 4.1% increase last year, and markedly lower than the 5%-plus gains seen in prosperous economic times.

"This holiday season is going to be challenging," Ken Hicks, chief executive of Foot Locker Inc. (NYSE: FL), told The Wall Street Journal.

Consumers are definitely not in much of a spending mood. The 45.4 September reading of the Consumer Confidence Index, although it was up slightly from August, is far below the 70.4 level it had reached in February. The index usually is over 90 in a thriving economy.

Even more damning, Americans are almost universally pessimistic about the U.S. economy. In a recent CNN/ORC International poll, 90% of Americans said economic conditions were "poor," up from 81% in June.

Another survey, conducted last month by AlixParters LLP, found that 41% of consumers planned to spend less on holiday shopping this year. That's up from 31% last year.

"Consumers are very apprehensive and cautious in spending, and we expect that to continue," Diane Swonk, chief economist at Mesirow Financial, told USA Today.

Competing for Dollars

That means holiday retail sales will be captive to bargains and deals more than ever this year, particularly at discount and mid-level retailers.

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