Worthless Holiday Hype Never Ends


Garbage In = Garbage Out

” Let’s get this out of the way upfront: Retail sales were not up 16% during the holiday weekend. Nor were they up 14% on Nov. 29, Black Friday.

” That we even have to state this tells us a lot about how easy it is to fool people into believing things that are not true. It is also revealing about the state of economics reporting, the effectiveness of fake news and the sheer gullibility of too many journalists…

For at least the past 15 years, the National Retail Federation has been misleading America with a series of reports on holiday shopping. Your humble Grinch takes it upon himself to point out this annual exercise in erroneous claims…

What’s wrong with those numbers? They are based on sentiment surveys, not real spending…Because the advance monthly retail report for November won’t be released until Dec. 13, we have no idea yet how much shoppers spent during the latest holiday weekend. Since the NRF is likely to issue more Panglossian reports between now and the end of the month, keep in mind that the December retail sales data won’t come out until Jan 16.

” But this too is simply a guess. Asking people how much they spent last year (who can remember?) and how much they intend to spend this year (who really knows in advance?) gives you very little insight into their actual spending. Indeed, based on the track record of this methodology, the odds greatly favor this forecast being wrong.

RTFA. Barry Ritholtz earns a living providing accurate information and advice to investors. Retail sales are just one area of his expertise. But, crappola from business associations offered up as accurate when they are nothing more than foofaraw preamble for a sales pitch ain’t worth the electrons printing them on the screen of your computing device. Big or small, the hustle remains nothing more than a pitch for your wallet.

A case study in crap data put to meaningless use

❝ On Monday, I cast doubt on the many stories about how Black Friday retail sales were off to a disappointing start. This is an important story because retail is such a critical part of the U.S. economy, and because such a large share of the industry’s sales occur during the roughly five weeks between Thanksgiving and Christmas. But the more important point — at least for my purposes — is that the initial reports, thanks to the National Retail Federation, are a case study in how to obtain meaningless data and then put it to bad use.

❝ The NRF reported a 3.5 percent drop in spending. “Average spending per person over Thanksgiving weekend totaled $289.19, down slightly from $299.60 last year,” the organization said in a statement. This information was based on asking consumers how much they figured they would spend this year versus a year ago…

A lousy guess turns out to be wrong. Q’uelle surprise!

❝ I make a big deal about the retail trade group’s record of inaccuracy every year for a few reasons: it is important for investors — and indeed, citizens — to be grounded in reality. Most human progress is the result of the work of scientists, technologists and logicians who rely on facts and testable theories…

❝ This is crucial because retail sales are such a big deal. Almost 16 million people work in retail, or about 10.9 percent of the U.S. labor force. It accounts for a huge percentage of the overall economy. Retail sales provide a window into consumer sentiment, as well as corporate revenue, profits and investment decisions. By some measures, consumer spending counts for almost two-thirds of gross domestic product.

❝ …It is of course way too early to have the final retail sales data, but we do have some early numbers based on actual sales. First Data Corp., a point-of-sales transaction processor, says that it examined data from almost 1 million merchants and concluded that sales so far this holiday shopping season are up 9 percent from a year earlier. Furthermore, perhaps in a sign of the state of the industry’s health, sales of electronics and appliances rose 26.5 percent, compared with a lackluster 2.3 percent gain last year. First Data also found that the average transaction grew by more than $41 year over year.

Oh.

❝ First Data noted that its analytical methodology “is based on actual consumer transactions rather than surveys or speculation.” The company has access to this information because it processes actual credit-card and debit-card transactions.

RTFA. We’re in an extended season of mediocre surveying, surprising results, poor planning afflicting anyone making decisions based on “truthiness”.

Barry is speaking to investors; but, his point of view on hard data needs to be taken to heart across the spectra from politics to Giftmas shopping.

Thanks, Barry Ritholtz