U.S. retail sales should rise 2.5 percent this year, signaling that store chains have made it through the worst of the downturn as improvements in the housing and job markets bolster shoppers' confidence, a trade group forecast on Tuesday. The 2010 forecast from the National Retail Federation marks an expected improvement from a 2.5 percent drop in 2009 and a 1.3 percent increase in 2008. The data covers retail industry sales, excluding automobiles, gas stations, and restaurants.

This year's sales forecast, while calling for growth, is still a modest one. Excluding the past two years of recession, a 2.5 percent rise in retail industry sales would mark the lowest year-over-year increase since 1995, when the trade group began tracking such figures. "I wouldn't describe this as a very strong year," said NRF Chief Economist Rosalind Wells in an interview. "We're not going to have a V-shaped recovery in the economy, and we won't have a V-shaped recovery in consumer spending or retail sales. It's a slow return to a more normal level."

U.S. retailers just completed a better-than-expected holiday sales season. Holiday retail sales rose 1.1 percent in 2009, according to the NRF, beating its own forecast for a 1 percent drop in sales for the November-December period. Retail chains were able to improve upon a dismal 2008, when holiday sales fell 3.4 percent, by cutting inventories and offering more targeted discounts to attract frugal shoppers.

Source: TReuters