NRF Expects Economic Slowdown in '06

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NEW YORK--The National Retail Federation expects an economic slowdown and restrained consumer spending that will trim industry sales gains.

Overall retail sales will grow an estimated 4.7 percent this year, down from last year's 6.1 percent. The predictions exclude automotive, gas stations and restaurant sales.

"With the housing market beginning to slow, consumers will be challenged to find new sources of spending power," NRF chief economist Rosalind Wells said at the NRF's 95th Annual Convention & Expo.

High energy costs also will crimp growth, the Washington-based association said.

The strong retail performance in the second half of 2005 is not likely to be replicated this year. NRF estimates first quarter sales will grow 5 percent versus 6.5 percent in the fourth quarter of 2005.

Though the NRF is cautious about this year, it is projected that the apparel and accessories, food and beverages, health and personal care retail sectors will see steady sales gains in the 4 percent to 5 percent range.

Wells expects chairman Alan Greenspan's replacement at the Federal Reserve, Ben Bernanke, will play a key role in crafting monetary policy that curbs inflation.

NRF said near-term underlying inflationary pressures appear to be under control, productivity is high and unit labor costs are low. These factors should give the Fed some breathing space.

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