The National Retail Federation (NRF) released its 2005 forecast today, predicting that GAFS sales (general-merchandise stores, which include book and music stores) will increase 3.5% from last year.

In its quarterly Retail Sales Outlook Report released this morning at the NRF Convention & EXPO in New York City, NRF cites tough comparisons and lack of economic stimulus as the reasoning behind its guarded forecast. For starters, strong comparisons will make this year more difficult for growth, said NRF. Last year GAFS sales soared 9.9% in the first quarter, which will make first-quarter growth this year hard to achieve. This year, due to tough comparisons, NRF is predicting growth of 3.7% for the first quarter. GAFS sales grew 6.7% in 2004, the highest retail sales growth since 1999.

"This year, consumers will be under increased financial pressure due to higher energy costs and slow wage growth," said NRF Chief Economist Rosalind Wells. "Additionally, past stimuli provided by tax cuts and very low interest rates will no longer be there to boost consumer spending."

The luxury sector is expected to thrive this year because high-income families are less affected by slow income growth and higher energy prices, Wells said. Discounters, on the other hand, will continue to be challenged as their core consumers are most affected by higher energy costs and slow income growth.

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