US retail sales in the Christmas shopping period are expected to fall this year by one per cent to $437.6 million, according to the National Retail Federation (NRF), marking the second consecutive year of decline and the first ever year-on-year drop since 1992, when the data was first collected.

While this falls significantly below the ten-year average of 3.39 per cent holiday season growth, the decline is not expected to be as dramatic as last year’s 3.4 per cent drop in Christmas sales nor as severe as the three per cent decline in annual retail industry sales expected for all of 2009.

The year-end holiday shopping season is a critical one for retailers, and can account for 25 per cent to 40 per cent of full-year sales. The 2008 season was a disaster for retailers, as a financial crisis swept across the globe in September and consumers cut spending on nearly everything but bare necessities. Many stores were left with bulging racks of unsold merchandise and slashed prices by 70 to 80 per cent, taking a big hit on profits.

Though some hopeful signs of a recovery have begun to emerge, including better-than-expected sales in August and momentum in the stock market, continued consumer uncertainty over job security and housing values will continue to take a toll on spending this season, the NRF said.

Tracy Mullin, president and chief executive of the NRF, said that retailers had been focusing on cutting back as much as possible on operating costs in order to pass along aggressive savings and promotions to customers.

The International Council of Shopping Centers gave a slightly more bullish projection, saying that the 2009 season should be "a lot better" than 2008, with sales at stores open at least a year in November and December expected to rise one per cent.

Retailers and analysts will now be closely watching September sales reports due this Thursday from around 30 key retailers, including Macy’s, Target and Gap.

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