updated 11/18/2005 3:34:41 PM ET 2005-11-18T20:34:41

The retail industry's hopes seem to be rising for a better holiday season.

Following a better-than-expected report on October retail sales, the National Retail Federation plans to raise its Christmas sales projections over the next few days from its earlier forecast of a 5 percent gain, the head of the organization said Friday.

In 2004, retailers posted a 6.7 percent sales gain in the November and December period, compared to the previous year.

"We are very bullish," said Tracy Mullin, CEO of the Washington-based trade organization, declining to say what the new estimate will be. "I think consumers are feeling good." Another encouraging sign is that more shoppers are paying cash and using their debit cards, she said.

Mullin offered her assessment Friday at a media event with U.S. Commerce Secretary Carlos M. Gutierrez, and Macy's executives at the retailer's Herald Square store. Earlier, Gutierrez met with 12 executives from a diverse group of retailers including Saks Inc. and 1-800 Flowers.com to discuss the strength of the U.S. economy going into the holiday season. Mullin said that retail executives were positive about the season.

"Our economy is strong, and we are seeing that in retail sales," said Gutierrez, pointing to growth in gross domestic product in the July-September quarter and what he believes is a solid job market. "We should have a very good holiday season," he said.

Gutierrez said he is not worried about the recent dip in consumer confidence, because he hasn't seen the decline "correlate" with actual spending results.

Gutierrez said the economy has made progress in the aftermath of Hurricane Katrina, which led to a spike in energy costs and had fueled worries about consumers' ability to spend for the critical November and December months. Recent declines in gasoline prices, while still above year-ago levels, should help shoppers open up their wallets this holiday season, he said.

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