By Katie Hunt
Business reporter, BBC News
The Toy Retailers Association has unveiled a list of 12 toys that it expects will dominate kids' Christmas lists this year.
Toymakers have largely played safe with old favourites and TV and movie tie-ins, but have given them a technological twist.
The list includes a new version of perennial favourite Barbie that incorporates an MP3 player, a fluffy puppy that grows bigger the more it is petted by its owner, and Optimus Prime, the robot hero of this year's hit summer movie Transformers.
"Technology is getting cheaper and kids like things that do things," said Val Stedham, president of the Toy Retailers Association.
Ms Stedham said that the array of film and TV-related toys did not mean toy makers lacked originality.
"Kids watch things on TV and they relate to them as products," she said.
Last year's best-selling toy was the Tamagotchi, the electronic pet.
The bad news for parents is that toy prices - after falling for a decade thanks to China's cheap labour costs - are beginning to rise and this year's toy recalls could result in delays in getting toys on shelves.
The toys on this year's list have an average price tag of £32, compared with £30 in 2006, and toy industry experts say that prices will rise further.
Toymakers are grappling with rising raw material costs as the price of plastics and metal soar. Wage increases in China, which makes most of the world's toys, are also hurting margins.
Bryan Ellis, chairman of the Toy Industries of Europe, said that wage rates in the Pearl River Delta, China's manufacturing heartland where many of the UK's toys are made, had risen by 18% this year.
"Some of these costs will be passed on to the consumer. I think we'll feel them more next year when retail prices could rise by at least 5%," Mr Ellis said.
Some manufacturers such as Hasbro were moving their factories away from China to places like India and Vietnam in pursuit of cheaper labour, he said.
Recalls cause delays
Millions of toys, particularly in the United States, have been recalled this year because of safety fears. Some toys were coated in lead paint.
In response to the recalls, Chinese authorities have introduced extra testing at ports, spot checked factories and suspended export licenses for some manufacturers.
"There has been two or three weeks' disruption to the supply chain and that could cause some problems in the run up to Christmas, " Mr Ellis said.
But the toy industry, which is worth more than £2.2bn a year, does not expect to be troubled too much by the expected slowdown in the UK economy next year.
"History has shown that in a recession toys perform quite well," said Ms Stedham at the Toy Retailers Association.
"Kids are the most precious parts of our lives and we tend to spoil them even if times are tough."