Cue stage lights.
Announcer: In tonight’s performance, the role of the National Retail Federation will be played by CNBC
Yesterday morning, CNBC announced yesterday that "Americans plan to spend an average $839 during the holiday season, up 17.6% from last year, the survey says."
That may be technically true — that’s what they said they plan on spending — but as any good behavioral economist will tell you, what people say they are going to do, and what they actually do are often worlds apart.
Blame it on Fox Business. With competition heating up, we now have a race to put forth the most cheerleading happy talk either station can muster.
As we have so painstakingly detailed in these pages over the past few years, consumers — indeed, Humans in general — are notoriously bad at forecasting even their own behavior. These surveys are classic examples.
The mother of all survey abusers are the National Retail Federation. Each holiday season, this group polls a group of shoppers, and declares that spending will be up by some outlandish amount. Each year, this survey driven forecast is proven to be wildly wrong.
In 2005, based on a survey on Black Friday and Saturday, the NRF forecast a 22% rise in holiday shopping gains for the Thanksgiving Weekend. The results were off that 22% gain by an order of magnitude: Up just 1%. The WSJ eventually ran a piece dissecting the methodology: Holiday Sales Numbers Don’t Add Up.
We saw the same foolishness resurface again in 2006, with an 18.9% sales increase forecast (More Bad Data from the NRF?). Of course, the reality was nowhere near that, with sales gains below 5% (How Good Were Retail Sales Really?). And of course, back-to-school-season was another opportunity to repeat the error: There They Go Again: NRF Redux.
If you want to know how much people THINK they are going to spend, you can ask them.
If you want to know how much people ACTUALLY SPENT, count the cash register receipts.
As history has proven again and again, there is little correlation between the two.
Surprise! Americans Set to Open Wallets This Holiday
CNBC.com 15 Oct 2007 | 08:48 AM ET