Holiday shopping season may be just ho-ho-hum.

It's that time of year for retail's annual guessing game: What's the outlook for the holiday season?

As area malls and department stores begin setting up their holiday displays, the expectations appear good, though not great.

"We're pretty cautious in general. We think economically it's going to be OK," said Linda Frost, marketing manager for the Century City Shopping Center.

"Usually I'm the one to say everything's going to be great, but I don't think we'll see double-digit increases," she said.

Merle Goldstone, a spokeswoman for Macy's West (consisting of all the California Macy's stores), said the chain is anticipating a 2 percent to 3 percent sales increase over last year for the holiday season. "We're cautiously optimistic," she said.

With the economy still on a roll, why the less than cheery forecast?

Industry observers point to a shift in spending priorities and the fact that retailers are beginning to understand that the holiday season is no longer as important as it used to be.

Part of the problem may be that, while overall holiday spending is going up, people aren't spending as much money on gifts.

According to an American Express Retail Index survey, overall spending is expected to rise 6 percent this year to an average of $1,233 per consumer.

But much of that goes for travel and entertainment; gift spending is expected to average $879, down from $900 last year.

Another factor that could dull expectations is the direction of Wall Street.

"If the stock market remains volatile, that could impact people's perception of whether they're willing to spend," said Richard Giss, managing partner at Deloitte and Touche LLP.

"The double-digit days are over," said Pamela Rucker, a spokeswoman with the National Retail Federation. "Holiday spending is more conservative."

According to two recent surveys by the National Retail Federation and the International Mass Retail Association, retailers can expect a 3 percent to 4 percent increase in holiday sales this year.

Despite those cautious numbers, some local merchants are providing rosier predictions for the coming season.

"I probably wouldn't have said this last year ... but based on business so far this year, I anticipate a very strong holiday season," said Don Trefry, general manager at the Beverly Center. "We've had a lot of new stores opening for the holidays."

The Beverly Center recently added a Pottery Barn store and is adding two new stores in the coming weeks - Restoration Hardware, a furnishings and hardware store, and a Baby Gap apparel store for infants and toddlers.

The Century City Shopping Center has opened a large number of new stores in recent months - including J. Crew, Restoration Hardware, Jhane Barnes and Hugo Boss. As a result, revenues have "been real strong," according to Frost.

"We expect holiday sales to be on par with last year," she added. "But that's mainly due to the new stores."

Holiday spending remains vitally important to retailers, in some cases accounting for as much as half of a merchant's annual sales. Fourth-quarter department-store profits have nonetheless fallen every year since 1992, according to an analysis by BT Alex. Brown & Sons.

This could be because a majority of consumers are now making their Christmas purchases at discount department stores. The IMRA Gallup survey found that 75 percent of shoppers plan to buy gifts at such outlets.

What consumers plan to buy this year, according to the IMRA study and retailers, are toys, including the Interactive Barney, Star Wars Action Figures, Holiday Barbie, Giga Pets and others.

As early as last week, an assistant manager at Beverly Center's KB Toy Store saw the Sing and Snore Ernie Sesame Street toy "start moving off the shelf."

Home accessories and furnishings stores like Pottery Barn, Restoration Hardware and Crate & Barrel are also expected to be hot this season.

Retailers are expecting electronics and computers to have a better year than they did in 1996.

"Electronics had a real weak Christmas last year," said Giss. "There's some new computer hardware items and new digital cellular phones (this year), so I think we will see a little resurgence."