NEW YORK—The National Retail Federation (NRF) issued its 2008 economic forecast this week, predicting that general retail industry sales (which exclude automobiles, gas stations and restaurants) will increase 3.5 percent from last year. Citing the U.S. housing slump and slower job growth, the organization expects the slow pace in sales growth to continue before picking up in the second half of this year.

While the NRF outlook is reserved, NRF expects sluggish first half sales to eventually give way to stronger sales in the third and fourth quarters of ’08. The forecast expects industry sales to increase 3.2 percent in the first half, followed by a 3.8 percent increase in the second half as economic conditions improve.

“Consumers will be under financial stress from high energy costs, the fallout from the housing slump, and sluggish employment and income growth,” said NRF’s chief economist Rosalind Wells. “Shoppers will seek to pay down debt, spend more in line with income growth, and approach discretionary purchases with more restraint.” In the economic outlook, the NRF noted that a slowdown in consumer spending will determine real Gross Domestic Product growth and also forecast GDP to increase 2 percent this year, the slowest pace in six years.

She added, “Retailers will once again be forced to market to more practical consumers. Even areas of past high growth like luxury goods and online shopping will fell the pressure.”

In addition, the NRF Board, this week, called on Congress and President Bush to enact legislation to stimulate the nation’s economy. At its meeting during the NRF convention, the board unanimously adopted a resolution emphasizing that consumer spending represents 70 percent of the U.S. economy and called on lawmakers to act.

The group pointed out that its vote came after the Commerce Department announced on Tuesday that retail sales for December (excluding automobiles, gas stations and restaurants) rose 1.7 percent unadjusted over 2006 and decreased 0.4 percent seasonally adjusted from November. Combined November-December holiday sales totaled $469.9 billion, a 3 percent increase that fell short of NRF’s earlier prediction of a 4 percent increase.

The NRF  is the world’s largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as trading partners of retail goods and services. The NRF represents companies with 2006 sales of $4.7 trillion and as the industry’s umbrella group represents more than 100 state, national and international organizations.