Deck the malls: retailers cheery over prospects for holidays.

THE sluggish housing market and rising interest rates that are expected to slow holiday spending elsewhere in the nation shouldn't cut into local retailers' cheer, economists say.

"We don't think the housing Grinch is going to make off with our Christmas," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. The LAEDC predicts that L.A. County's spending will be up 8.5 percent over last year, well above what's predicted for the rest of the country, estimated to be as low as 2.5 percent and as high as 7 percent.

"International trade, professional services, and the motion picture business are all doing well," said Kyser, pointing to sectors that thrive in L.A. County. Ernst & Young LLP has predicted that this year's holiday spending will increase 6.5 percent, down slightly from a 6.7 percent increase last year. Deloitte & Touche USA LLP is anticipating a 7 percent increase in spending over the holidays, and that the housing market won't dampen the spirits.

Deloitte's study shows Southern Californians being slightly less confident about their jobs and the future of the economy, but less likely to let a dip in the residential market to affect their spending.

"More than any other consumers in the nation, California residents have been affected by significant economic challenges, including a major drop in the housing market and the highest gasoline prices in the country," said Deloitte's Jackie Fernandez. "Nevertheless, they continue to be upbeat about the economy and their own financial well-being."

There are a couple of reasons why L.A. is doing so well. The population

is growing, unemployment is low and the economy remains one of the best in the country. More jobs are being created, thanks in part to a booming international auto industry.

In terms of hot items, electronics are expected to lead the way this season. Apple Inc.'s iPod Nano and Sony Corp.'s Playstation 3 videogame player are high-end items sure to be on many shopping lists. DVDs, mobile phones and accessories, digital cameras, photo printers and high-definition TVs area also expected to do well.

In the toy realm, Mattel Inc.'s TMX Elmo is seen as a likely top seller, and children's apparel and jewelry are additionally expected to bolster sales.

"I think consumers are being very confident, especially in Southern California," said JoAnne Brosi, senior general manager at the Glendale Galleria. "And I think it's going to be a great holiday season."

Galleria executives are expecting a 5 percent increase over last year.

Ernst & Young expects Internet sales to jump 20 percent and gilt cards are expected to comprise a major portion of holiday spending, as well. Gift card revenue isn't realized until the cards are cashed in, so that diminish the holiday sales figures, but help some stores during the January and February cooling-off period.

BY EMILY BRYSON YORK

Staff Reporter