Santa Claus has his eye on bags of sat-nav gear this Christmas

Verdict Research's seasonal forecast says that price cuts and product improvements will push sat-nav devices up the Christmas wish-list.

But it also warns retailers they will see margins squeezed by higher costs.

Verdict predicts that the UK's total Christmas shopping spend will rise 3.3% to �74.4bn in 2006.

Online shopping

The rise of the web is generating new shopping mechanisms from businesses like bookseller Waterstone's, Verdict says.

Recognising the massive success of online retailer Amazon, Waterstone's has set up its own transactional website in time for this Christmas.

Food retailer Tesco has used the online option to introduce a new range of non-food products to be sold under the internet banner Tesco Direct.

Verdict expects the overall value of goods bought online during the last three months of the year to shoot up by 35% to �3.4bn.

Braced for rates

Higher wages, energy and logistics costs will combine with the growing cost of goods from China to make this the first Christmas in six years that overall shop prices will not fall, according to the report.

Targeted promotions will highlight price cuts on selected items, but prices will creep up for other goods, Verdict says.

Verdict thinks that a much-anticipated Bank of England interest rate rise in November will not dampen consumers' desire to spend for Christmas.

It believes shoppers will remain determined to splash out in the run-up to the holiday and then tighten their belts in early 2007.