NEW YORK, Nov 25 (Reuters) - U.S. retail stocks held steady on Friday as investors watched holiday spending to gauge consumer confidence at a time when inflation and rising interest rates are weighing heavily on Main Street.

Consumer discretionary stocks, measured by the S&P 500 Consumer Discretionary sector which benefits from spending on retail, restaurants and vacations, edged up less than 0.1%.

Stocks were muted as crowds were thin on what has historically been the busiest shopping day of the year.

"If Black Friday shopping takes a hit this year, it won't bode well for the rest of the holiday period which is so important to retailers," said Craig Erlam, senior market analyst at Oanda.

Consumer discretionary stocks are down nearly 32% year to date, more than double the 15.5% decline in the broad S&P 500 , as consumers have been walloped by surging inflation and the swiftest increase in interest rates since the 1970s.

"These stocks are a clue as to how fast the economy is slowing and whether slowing inflation is lifting confidence on Main Street," said Jim Paulsen, chief investment strategist at the Leuthold Group.

Ralph Lauren Corp, VF Corp and Autozone Inc led the sector's slim gain on Friday, each adding more than 1.7% compared with a less than 0.1% loss in the benchmark S&P 500.

Consumers spent a record $5.29 billion online on Thanksgiving Day, according to Adobe Analytics data, up 2.9% from a year ago, driven by big discounts in categories such as toys and electronics.

The steepest Black Friday deals, named for the day after the Thanksgiving holiday, were for toys, peaking at 34% off listed price, electronics and computers.

U.S. consumer prices rose at a slower pace than economists had expected in October, pushing the annual increase below 8% for the first time in eight months and helping spark a broad U.S. stock market rally on hopes that inflation had finally peaked after hovering near 40-year highs.

Overall, the National Retail Federation, a trade group, forecasts that holiday sales, including e-commerce, will rise between 6% and 8% to between $942.6 billion and $960.4 billion during November and December. That would come in below last year's 13.5% jump and the 9.3% gain in 2020.

Retailers began offering unusually early discounts this year.

Target Corp, Kohls Corp and Amazon.com Inc ran early Black Friday deals that discounted toys and some other goods by as much as 50%.

Those companies did not respond to requests for comment.

Even with steep discounts, consumers will have to spend more for popular products like a PJ Masks toy car or Mattel Inc's Mega Hauler semi-truck because prices have risen faster than promotions, according to data provided by DataWeave.

Mattel did not respond to a request to comment.

Shoppers are being wooed as the closely followed University of Michigan consumer sentiment poll was revised up Wednesday to up to 56.8 from 54.7, beating the consensus expectation of 55.0 but still below the 59.9 in October. Expectations for purchasing long-lasting manufactured goods fell 21% due to high interest rates and high prices, the survey found.

"The sentiment data has been sliding sideways as consumers try to reconcile solid economic and labor market conditions against expectations of a recession and harmful inflation," said Thomas Simons, an economist at Jefferies LLC.

(Reporting by David Randall; Editing by Nick Zieminski, Anna Driver and Richard Chang)