Check out how holiday retail sales came in at the low end of expectations, but weren’t as a bad as some feared.

U.S. specialty apparel retailers saw sales rise 3.6 percent during the crucial holiday shopping period, which lasts from the Friday after Thanksgiving through midnight December 24, according to SpendingPulse data released on Christmas Day.

SpendingPulse —  a report compiled by MasterCard Advisors — had expected consumers to spend between 3.5 and 4.0 percent more on holiday gifts than they did last year last year.

“It’s more at the lower end of the expected range, but more or less in line with reduced expectations coming into the holiday season,” said Michael McNamara, vice president of Research and Analysis of MasterCard Advisors.

Analysts and policy makers have kept a close eye on U.S. consumers to see how their spending is changed by rising food and fuel costs, the U.S. housing meltdown, and concerns over whether the economy is headed for a recession.

But despite the challenges, things could be a lot worse, Andre Bakhos, president of Princeton Financial Group told Reuters.

“Early tracking numbers on retail sales suggest they’re a bit light. But there’s a feeling it could have been a lot worse, as there has been talk of recession. The market is looking at this as the cup is half full.”

Also in the basket:

Margins to make or break holiday (Women’s Wear Daily, subscription required)

Retail stocks slumber as worrisome 2008 looms (New York Post)

Futures dip on retail worry, Target drops (Reuters)

Gum that won’t stick to shoes? It’s in the works ( New York Times)