But as the weather calmed, the threat of the "fiscal cliff" picked up. In December, lawmakers remained unable to reach a deal that would prevent tax increases and government spending cuts set to take effect at the beginning of 2013. If the cuts and tax hikes kick in and stay in place for months, many economists expect the nation could fall back into recession.

The news media discussed this possibility more intensely as December wore on, making Americans increasingly aware of the economic troubles they might face if Washington is unable to resolve the impasse. Sales never fully recovered, Cohen said.

The results were weakest in areas affected by Sandy and a more recent winter storm in the Midwest. Sales declined by 3.9% in the mid-Atlantic and 1.4% in the Northeast compared with last year. They rose 0.9% in the north central part of the country.

The West and South posted gains of between 2% and 3%, still weaker than the 3% to 4% increases expected by many retail analysts.

Online sales, typically a bright spot, grew only 8.4% from Oct. 28 through Saturday, according to SpendingPulse. That's a dramatic slowdown from the online sales growth of 15% to 17% seen in the prior 18-month period, according to the data service.

Online sales did enjoy a modest boost after the recent snowstorm that hit the Midwest, McNamara said. Online sales make up about 10% of total holiday business.

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Daniel Wagner can be reached at www.twitter.com/wagnerreports.
Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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