The National Retail Federation is issuing a less-than-merry forecast for the upcoming 2008 holiday season, projecting that sales will rise just 2.2 percent this year, to $470 billion. The gain would fall well below the 10-year average of 4.4 percent holiday sales growth and would represent the slowest growth since 2002, when holiday sales rose 1.3 percent.

"Current financial pressures and a lack of confidence in the economy will force shoppers to be very conservative with their holiday spending," said NRF chief economist Rosalind Wells. "We expect consumers to be frugal this season and less willing to splurge on discretionary items."

NRF says the challenging retail holiday environment will mirror the struggling housing market and rising unemployment, coupled with meager income gains that will continue to hamper the consumer throughout the season.

Further, while food and energy costs will remain high, the current financial industry crisis will continue to chip away at consumer confidence. The Washington-based NRF thus does not foresee an economic turnaround until the second half of next year.