Outlook is bullish on holiday buying

"We're a little more bullish on the holiday season," says Scott Krugman, a spokesman for NRF.

While the last two holiday seasons have been pretty good for retailers, this year would be an improvement over 2002, when the NRF estimates retail sales rose only 1.3 percent.

The biggest factor this year, says Mr. Zandi, is energy prices. In total, consumers will spend $150 billion more on energy than they did last year. "That's why I think people will spend a little less on toys and more on paying their energy bills," says the economist.

So it hasn't hurt that gasoline prices have fallen 85 cents a gallon or more from their post-hurricane Katrina high point, which topped $3 a gallon. Nationally, according to GasPriceWatch.com, gasoline is down to $2.14 a gallon. In Augusta, Ga., a gas station is selling it for $1.75 a gallon.

The lower prices are especially welcome in states where shoppers drive considerable distances to get to malls.

In the Los Angeles area, gasoline is now retailing for about $2.50 a gallon. This is a big relief, says Barry Riemer, owner of Hooked on Handbags, which sells overstocked merchandise at the Valley Indoor Swap Meet in Woodland Hills.

"I was hearing people in my mall a month ago forecasting a pretty bleak holiday season," he says. But now, the merchant says, "The trend in gas prices is down, and that helps."

High gasoline prices have not affected retailers who cater to upscale consumers. One of those stores is A Nose for Clothes, a south Florida dress shop with eight locations. Despite some days closed because of hurricane Wilma, the small chain expects double-digit growth, says Freda Greenbaum, an owner. "In the last few weeks, our business has picked up dramatically," she says.

Part of the improvement, she says, is that fashions this season are not overly trendy, compared with the bare-midriff look of a few years ago. "The market is showing clothes that are easy for a woman to wear," she says.

For retailers, this is by far the most important time of the year. The Friday after Thanksgiving is called Black Friday because it has historically been the time of year when stores go from operating at a loss (in the red) to making a profit (in the black).

A strong holiday season, says Mr. Feinberg, gives retailers the cash to restock their shelves in the new year. However, a weak season means the retailer has to borrow more, which means lower profits, less merchandise, and less hiring, he says.

"If they don't get the sales now, they can't expand and buy merchandise for the spring and summer of next year," says the Purdue professor.

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