WASHINGTON — The economy appears headed toward the deepest recession in modern times, consumer confidence is at record lows and personal wealth is being destroyed daily on Wall Street. Against that backdrop, retailers must persuade weary Americans to pull out their wallets and shop this holiday season.

"What you are seeing is a perfect storm in terms of weakness in core economic indicators, each of which is having a negative effect on the consumer, and because of that it is having a profound effect on the retail industry," said Scott Krugman, a spokesman for the National Retail Federation.

The challenges will be big and small. Almost three-quarters of consumers haven't started holiday shopping yet, waiting for sales. Gift-card spending is projected to fall 5.6 percent as people pull back and shop for bargains.

Consequently, the federation, a trade group in the nation's capital, expects national sales to be slightly off last year's slow pace. Over the past decade, holiday sales have averaged 4.4 percent annual growth, but they're expected to grow this year by a milder 2.2 percent. That's below even last year's sluggish 2.4 percent rate. Still, it's growth, and if it happens, that'll show once again the resiliency of the American consumer. Hard times or not, Christmas is about spending.

But problems go beyond the economic downturn that's clouding this holiday season. Credit-card companies are rapidly yanking bank lines of credit from consumers saddled with debt, fearing a rise in defaults as unemployment soars. In addition, electronics chains aren't offering big financing deals as before, as credit markets remain dysfunctional and banks are in turmoil.

In a survey released Friday, the Conference Board, a New York business-research center, found that U.S. households expect to spend an average of $418 on holiday gifts this year. That's down from last year's estimate of $471.