The Coachella Valley's 2009 holiday forecast is a bit like a gift sent from that beloved, but eccentric out-of-town aunt: You're hopeful, but you're just not sure what's really beneath all the wrapping.

As holiday decorations and the accompanying sales signs start to multiply at desert retailers, merchants are holding their breath that recent good news on Wall Street and other sectors of the national economy will result in a not-so-humbug shopping season here.

Some head into the start of the critically important stretch with optimism.

“People have loosened the death grip on their wallets,” said Tony Larcombe, co-owner of Dwight Polen Collection, a fine Chinese antique and furniture store in the uptown design district of Palm Springs. He said foot traffic is starting to pick up.

Many others, however, remain uncertain — and a bit worried because of local customers like Manuela Gatelum. The tough economy has triggered a prediction from her that retailers hate to hear.

“You have to be a little careful,” she said. “And yes, I'll be buying less.”

The holiday shopping season is critical for retailers. For many stores — in the desert and across the country — the weeks leading up to Christmas morning often determine their annual profits.

Even more is at stake in a market like the Coachella Valley, where small businesses and boutiques dominate the economic scene in shopping districts like downtown Palm Springs, El Paseo in Palm Desert, The River at Rancho Mirage and strip centers in La Quinta. A wave of foreclosures and near-record unemployment have dominated headlines and kitchen table conversations — and that's had a direct effect on spending.

The big question being asked now: Will shoppers spend more than they did in 2008, which is considered for many one of the worst holiday shopping seasons on record.

The National Retail Federation, the largest trade group for big and small merchants nationwide, predicts holiday sales will be 1 percent lower than 2008.

But there has been a mini-wave of good news recently that has some forecasting gains from last year.

• Manufacturing production has taken a slight upswing.

• Wall Street has performed strongly the past few weeks and eclipsed the mythical 10,000 mark.

• The International Council of Shopping Centers has reported positive retail chain store sales numbers six weeks in a row, with a 2.1 percent hike in October on a year over year basis that's led to a forecast November sales will rise 5 percent to 8 percent.

That has some economists feeling downright jolly.

“The improvement in the stock market has had a significant impact on the affluent shopper's willingness to spend,'' said Michael Niemira, ICSC chief economist and director of research. “The luxury market has shown its first positive reading since May 2008.”

Inland empire economist John Husing called the October numbers quite encouraging.

“We all expected things to weaken,'' he said. “Now, I suspect we'll see a stronger than expected Christmas.”

Hiring signs have even popped up in retail locations from Cabazon to Indio, a sure sign there's been some pocketbook loosening at stores.

“Everything is relative,'' said Chapman University economist Esmael Adibi.

“Some experts are calling for outright decline from the previous year, but we're seeing an increase of 1.5 to 2.5 percent in total spending'' in the Riverside County market, Adibi said.

The biggest motivator? It's the consumer psyche, Adibi said. “We said the recession would end in the third quarter of this year,'' and that's boosted the confidence of people who still have jobs.

“They come out once they start to feel a little security,'' he said, with this cautionary footnote: Those purchases will differ from 2007 and 2008. And not everyone will get what they wish for.

“Shoppers who went to Nordstrom may wind up at Macy's,” Adibi said. “Those who shopped Macy's may show up at Target and Wal-Mart.”

Inventory levels are low: The Federation has warned that 41 percent of companies surveyed in recent months said they cut back on inventory.

Shopping habits could change

The National Retail Federation's 2009 survey of holiday consumer intentions says shoppers will spend an average of $683 over the season stretching from Thanksgiving and Hanukkah to Christmas and Kwanzaa.

That's down 3.2 percent from last year's $705.

Two-thirds of Americans, who say they will adjust spending because of the economy, plan to shop sales, clip coupons, use last year's decorations and make changes in gift-giving.

Practicality will prevail. Electronics and apparel will remain on the list, but homemade gifts may come into vogue. So will gifts bought with pooled resources.

“While last holiday season was filled with chaotic confusion, adjusting to uncertainty has now become routine for many Americans,'' Federation president and chief executive Tracy Mullin said.

“This holiday season will be a bit of a dance between retailers and shoppers.”

Barbara Averett of La Quinta headed into a Toys-R-Us store in Palm Desert last week with a pared-down Christmas list.

Shaken by news of California workers who have been furloughed, laid off or given pay cuts, Averett said she used to shop for the entire family.

“Now, we're just buying for the children, five nieces and nephews,'' she said.

Stores try to build early momentum

Advertising has already begun in earnest to gain market-share.

Coupons from major retailers like Kohl's department store, Best Buy, Macy's and Stein Mart have covered the region like a wooly blanket. Sales banners, calling attention to mark-downs of 50 to 70 percent, are already up. Two-for-one deals on jeans abound.

“In this climate, you have two choices,'' said Joy Meredith, president of the Main Street Palm Springs merchants association and owner of Crystal Fantasy in Palm Springs.

“You can go on (about how) the economy is going to be bad, or you could work on thinking about creative ways to change it for yourself.”

Diane Dzurochak, marketing director of Westfield Palm Desert, said the mall isn't focusing only on pre-Thanksgiving Day sales.

Westfield will kick off its “Twelve Days of Shopping” promotion on Black Friday, the day after Thanksgiving, to drive sales through the holidays. Think five golden deals on Dec. 5 with special savings at five retailers. The next day, six choirs will be singing to ring in sales.

Ashley Hardie, spokeswoman for Wal-Mart, said the national discount retailer rolled out special weekly offers through the holidays.

“We know these are tough times for families,'' Wal-Mart vice chairman Eduardo Castro-Wright said. “We made a purposeful decision to focus initially on everyday staples, as well as items that often require larger spending commitments in preparation for Thanksgiving and Christmas.”

Daniel's jewelry store in Westfield celebrated 60 years in business last week with a 60 percent off sale.

“We've always had sales like this,'' said Daniel's employee Sandy Pollard. “They just arrived a little early to get the flow going.”

It seems to have worked, said candy kiosk employee Jessica Shumaker of Palm Desert.

“There's been a steady stream of people going by all week,” she said.

“The vibe's returned,'' agreed Larcombe of Dwight Polen Collection, a Main Street board member. The break in temperature has helped, as has the snowbird and coast city arrivals, but the store doesn't plan to rest on its old holiday laurels.

“We added more wood carvings, lamps and wall art,'' he said, items that cost between $48 and $175 and don't require as big a decision as a buffet for the dining room or a new armoire. “We've already noticed a difference in sales.”

Area outperformed others in 2008

Husing said the valley's diverse shopping offerings, and its tourism base, could help the local economy get on its feet sooner than other parts of the state.

“Tourists come to Palm Springs from the rest of the country,” he said, and since the nation will recover from the recession before California, the cities they travel to will ease out of their misery sooner than the rest.

Retail sales reports from the the past suggest resiliency, Husing said.

Even though sales fell across the valley by roughly 4 percent, some $10.6billion was lost in building permit activity and 130,000 jobs were lost in Riverside and San Bernardino counties, retail spending didn't constrict nearly as much as it did elsewhere in California, he said.

Palm Desert ranked ninth among the 48 Inland Empire cities with $1.6billion in retail sales in 2008, Husing said, and stood second to Ontario in per capita sales.

“The valley got its oomph from visitors,” Husing said.

Visitor stops

Tweet Edmonds of Lake San Marcos has been coming to Palm Springs with her husband every year before Christmas to shop and dine.

Edmonds buys a Swarovski Christmas pin every year in the Music Box & Clock Shoppe in La Plaza in Palm Springs, and makes sure to hit Coldwater Creek along El Paseo in Palm Desert.

“It's like old home week,'' she said, strolling past Bath Junkie in Palm Springs and plucking a sample off a silver tray store clerk Mary Moreno held in the doorway.

While Edmonds said she has been prudent about her spending over the past year, her manner of late is more carefree. Besides the broach, she's eyeing a crystal bracelet to take home as well.

“I feel we will have a good, busy Christmas,'' she said, offering this telltale sign: “My husband is a construction claims consultant and an expert witness. Business began to pop in May, and we've been swamped ever since.”