WSJ: Holiday Sales Numbers Don’t Add Up

The WSJ agrees that one cannot determine actual sales from a sentiment report:

Here’s how the NRF’s polling company, BIGResearch LLC, arrived at that estimate: The company has gathered an online panel of consumers who answer regular surveys about their buying habits, elections and other matters. The company emailed panelists on the Monday or Tuesday before Thanksgiving to advise them that a survey was coming over the weekend. Then a second email went out late Thanksgiving night, saying the survey was open. It stayed open until late Saturday night. The survey asked consumers a series of questions about their weekend shopping activity and season-long plans. The key question for the group’s estimate was, "How much did you spend on holiday shopping?"

BIGResearch averaged answers to that question, adjusting for factors like the age, gender and income of its 4,209 respondents. Then it extrapolated to all U.S. adults. The conclusion: spending was up 22% compared with the same weekend last year, as measured in the same way. About 8% of that growth came from the U.S. population increase, and with a greater percentage of respondents saying they plan to shop than did last year. The rest of the increase came from a surge in reported average spending over the weekend.

As an indication of consumer sentiment, the survey is valuable. As a precise measure of weekend spending, it should be viewed with caution. Respondents must recall or predict their behavior — there’s no direct count of spending. Also, big-spenders have an outsize impact on total spending, and with just over 4,000 respondents, there’s a risk that such spenders are either under- or overrepresented.

What’s more, even though the group’s press release was remarkably precise – it claimed the average expenditure was $302.81 – the survey didn’t ask respondents for a specific dollar amount, but rather to choose one of 16 dollar ranges that best fit their spending. I asked Phil Rist, BIGResearch’s vice president of strategy, how the company converted the range figures to hard numbers, but he told me the techniques were proprietary.

Yeah, I got a quote in it:

Barry Ritholtz, chief market strategist for the New York-based investment bank Maxim Group, called the NRF’s findings "false and unsupported assumptions" in an email to investors Monday, and said the survey methodology was ill-equipped to measure total spending. He added, "Investors who rely on it as investment advice are sternly warned they do so at their own risk." Mr. Ritholtz told me in an interview, "You can’t rely on consumer-sentiment data to predict consumer behavior" — citing as an example the closely watched University of Michigan consumer-sentiment index. "[Such data don’t] have a high correlation with actual spending patterns."

Incidentally, there’s a slew of data coming out today. Starting with the ECB Rate Announcement, followed by the US Jobless Claims (plus the Monster Employment Index), and then see
Personal Income and Spending data. At 10:00, we will get Construction
Spending (think it will be +13% ?), ISM Mfg Index, 3 & 6 Month Treasury Announcement,
and Motor Vehicle Sales.

I have no interest in tearing all of it apart, but if anything is unusually aberrational — more outlandish than usual — it just may come in for the full treatment.



Holiday Sales Numbers Don’t Add Up
November 30, 2005

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