The National Retail Federation said Thursday it now expects holiday sales for the November and December period to rise 3.8 percent to a record $469.1 billion. That's up from its more modest 2.8 percent forecast made in early October when the economy's health looked more uncertain.
The new forecast is hardly stellar. The projected gain is still below the 5.2 percent pace seen during the holiday 2010 season from the prior year, but it's well above the 2.6 percent average increase over the past 10 years.
And any upgraded forecast is good news as stores look to the final days before Christmas to rope in holiday shoppers.
"Retailers are cautiously optimistic that this season will turn out better than initially expected, bringing added stability to our recovering economy at a time when America needs it most," said Matthew Shay, NRF's president and CEO, in a statement. However, Shay acknowledged a number of factors, including the debt crisis in Europe and continued political wrangling in Washington that could hurt consumer spending for the 2011 season and into next year.
The figures in the NRF report exclude automotive dealers, gas stations and restaurants.
The improved forecast comes two days after the government released what the Washington, D.C.-based trade group called "promising" retail sales gains of 4.5 percent compared with the same year-ago period. That was helped by a strong shopper turnout over the Thanksgiving weekend, the official start to the season.
The trade group also cited that its recent consumer poll shows the average American has completed less of their holiday shopping than in previous years. That shows many shoppers bought more for themselves last month and have plenty of buying to do for their family and friends.
Overall economic growth has been picking up some steam in the final three months of the year, driven by rising business stockpiles and modest increases in hiring. But plenty of challenges remain. The job market is still weak, home values remain depressed, and shoppers face higher prices for basic household costs. That's why consumers continue to adhere to the habits learned from the Great Recession - sticking to necessities and focusing on fat discounts.
"Many shoppers continue to stick to their budgets and buy only what they need," said NRF Chief Economist Jack Kleinhenz in a statement.
So just as stores plied shoppers with the discounts and expanded hours at the start of the holiday season, they see the need to do the same for the finale, which includes some of the season's top spending days like this Saturday.
Starting this past Wednesday, 260 of Sears, Roebuck and Co. locations will stay open until midnight through Dec. 23.
Meanwhile, many online shoppers are expected to take advantage of the extended and often free shipping offers. According to a survey by the NRF, many merchants have set a later expiration for standard shipping rates for items to arrive by Christmas. This year, 87 percent of stores set a deadline of Tuesday, Dec. 20, or earlier, compared with 64 percent setting deadlines of Dec. 18 or earlier last year.