Retail industry sales are expected to increase only 3.5 percent versus last year as consumers respond to a number of financial pressures, according to the National Retail Federation (Washington).

“Consumers will be under financial stress from high energy costs, the fallout from the housing slump and sluggish employment and income growth,” said Rosalind Wells, NRF chief economist. “Shoppers will seek to pay down debt, spend more in line with income growth and approach discretionary purchases with more restraint.”

Despite its somewhat reserved outlook, the NRF expects sluggish sales in the first half to eventually give way to stronger sales in the third and fourth quarters. The association predicts sales increases of 3.2 percent in the first half of the year and increases of 3.8 percent in the second half as economic conditions improve.

“Retailers will once again be forced to market to more practical consumers, many of whom will be looking to trade down,” Wells said. “Even areas of past high growth like luxury goods and online shopping will feel the pressure. In 2008, the challenges will be formidable for everyone.”

In response, the NRF in January called on the U.S. Congress and President George W. Bush to enact legislation to stimulate the nation’s economy.

“This action shows how seriously the current economic situation is taken by the CEOs of the nation’s major retail companies,” said Tracy Mullin, president and chief executive officer. “Consumer spending and retail sales are the backbone of the nation’s economy. Stimulus that helps consumer spending will benefit all industries in the private sector.”

The NRF board called on lawmakers to act quickly: “The National Retail Federation calls upon the president and Congress to act quickly and in bipartisan fashion to enact targeted economic stimulus legislation that would put dollars back in consumers’ pockets to fuel and sustain economic growth.” [March 2008 PET AGE]