I nearly spit out my iced coffee when I saw this cross the tape:

"With record temperatures across the nation making headlines, many parents are already preparing their back-to-school shopping lists and thinking ahead to fall.  According to the National Retail Federation’s (NRF) 2006 Back-to-School Consumer Intentions and Actions Survey, conducted by BIGresearch, families with school-aged children will be spending more on back-to-school shopping this year than last, with the average family spending $527.08, up from $443.77 in 2005. Total spending is estimated to reach $17.6 billion, up from $13.4 billion last year."

That’s right — the NRF is once again forecasting a big increase in sales based on their survey.  For the back to school season, that’s a 31% back-to-school spending increase in 2006 versus 2005, and an 18.8% increase per family.

I don’t know what they are smoking at the National Retail Federation, but I have a suspicion it was grown in the hills of Northern California.

In case you forgot, for the holiday season in 2005, the NRR trumpeted Thanksgiving weekend
sales
as “blockbuster;” They received glowing media reports of sales having “surged 22% from a year ago to about
$27.9 billion.” In actuality,  the gains over the holiday sale season in 2005 were a mere 3.5%.

The track record of the National Retail Federation at forecasting actual sales has been awful. After the debacle that was their ’05 holiday season forecasts, the media seems to have wised up to their cheerleading.

The largest part of the problem is their methodology: They poll 9000 or so people, asking them what they intend to buy, and how much they plan on spending. They do not look at any actual retail sales data, reciepts, etc.

Polling is fine for certain things, but it has its limitations. If you want to determine what people think or feel or believe — that’s fine. However, its not a particularly good way to determine future behavior. As we have seen, people are rather poor forecasters of their own future actions. We’ve seen this repeatedly over the years; the most recent misleading surveys have been in the CEO CapEx and hiring forecast. They tend towards being much more optimistic about ramping up spending and new head count then they subsequently are.

Spending may increase or decrease somewhat, but given that gasoline prices have topped $3 gallon, and is hitting 25-year highs, I doubt very much we will see an 18.8% family spending increase, or a 31% increase in total sales.

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Annual Spending, Back to School Season

Back2school06_07

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Sources:
Don’t Believe the Hype: A Very Mixed Retail Picture
Monday, November 28, 2005   http://bigpicture.typepad.com/comments/2005/11/dont_believe_th.html

Gasoline prices top $3 gallon, hit 25-year high
Reuters, Sun Jul 23, 2006 4:21pm ET
http://tinyurl.com/hadsh

Electronics and Apparel to Fuel Back-to-School Spending,
According to Latest NRF Survey
-Total spending expected to reach $17.6 billion-
NRF Press release, July 18, 2006
http://tinyurl.com/qxse9

Category: Consumer Spending, Data Analysis, Economy, Retail

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “There They Go Again: NRF Redux”

  1. FliteTime says:

    Ha! Yeah, that’s funny stuff. As a parent of two toddlers, we’ve bought some backpacks (a.k.a. ‘non’-durable goods), crayons, and colored pencils. I’d say we’re done! We’re already thinking about how it might be a tight Christmas.
    One only needs to look at the retail index to see the truth:

    http://stockcharts.com/h-sc/ui?s=RTH&p=D&yr=2&mn=0&dy=0&id=0

  2. Craig says:

    Pay no attention to the man behind the curtain…….

    Pssst, hey man, the first one’s free.

    Come on down, this one’s got low miles, am/fm radio and low easy financing…..

    You gotta try Dr. Ritholtz’s magic elixir! Look what it did for this pathetic specimen, Mr. Chamberlain er’ Bernanke here…..
    Before he was a mere whimp, but after just one drink of Dr. Ritholtz’s elixir he walks, he talks, he crawls on his belly like a reptile!

    Hey man, wanna buy a pee chee and a backpack? You can’t get em’ at Walmart, they’re all sold out.

    See? You can’t believe everything you read.

  3. Glenn says:

    Barry, dude…calm down on the NRF press release. Anyone worth their salt who follows the financial markets knows that this is not an actual retail sales forecast…it’s just plain old marketing hype targeted at the poor saps out there who when they think the Jones’s are spending more money on their kids this year will stupidly step up their own spending….it’s a sad state of affairs out there.

    But thanks for harping on this type of stuff….and keep up the good work.

  4. Well, lots of MSM covered it as if it were legit last time

    See this debacle:
    http://bigpicture.typepad.com/comments/2005/11/dont_believe_th.html

  5. BDG123 says:

    Even if the NRF survey is accurate, what does it mean? Does it mean the economy is going to grow at 6%? The housing market will be spared? If parents are going to spend on anything, it will be their kids at the expense of buying things for themselves. How much will discretionary *family* spending rise? Or what about planned purchases for durables? The NRF is no different than NARI. A self aggrandizing propaganda machine. Similar to the Chinese Ministry of Propaganda. lol.

    Btw, some of these teen specialty retailers could see a sustained bounced if we get a rally. If. This is not a rally. They aren’t going to zero and some have come down so far so fast that they will be below zero in a month or two at this pace.

  6. sw says:

    Barry,

    Don’t listen to Glenn. The enthusiasm is great – its one reason why this is the most interesting econ/investing blog I read. Keep it up man!

  7. edhopper says:

    That’s funny stuff. I guess NAR’s David Lareah is moonlighting at the NRF:->

  8. Bill Conerly says:

    When I was a young economist, I started asking people how their business was going. I soon learned that two groups of people are not to be believed: retailers always tell you that things are great, and farmers always tell you that things are lousy.

  9. Jim Bergsten says:

    I find it fun and interesting to see:

    a. How early the “back to school” ads come out, and
    b. What they advertise

    This year, they started (out here in CA anyway) in early July. Some, clearly embarassed by the date, labeled their ads, “pre-season sale.”

    The earliest were school supplies. Lately, they are all jeans. That’s right — all jeans.

    Remember last year’s glut of unsold jeans? The problem has been solved — this year that’s all you’ll be able to buy.

    Reminds me of the old joke that ends with, “NOW find the umbrella!”

    Have a nice weekend, everyone!
    Jim B.

  10. glen about says:

    i agree, in nyc, back to school sales are being run by all mid and large chains. i think moms and kids are thinking about the heat wave and water and fun, but not thinking about actually returning to school.
    even DELL is running a back to school sale right now! but alas they missed already, and are probably just going thru the motions

  11. TexasHippie says:

    What’s the “back to school” event to get businesses to start spending money? These strong earnings seem to just sit around in cash. Well, at least somebody in this country is trying to save.

    To the bulls in the crowd, I’m interested in a discussion about where businesses are likely to turn their attention with their recent successes?

    As a new investor, all viewpoints are appreciated. Thanks!

  12. Jon says:

    The truth is that cosumers are a herd and herds are easier to manipulate than individuals. Ads, ads, ads!!! And guess what, even newer spiffier ads are coming down the road from people like Preface Media (www.prefacemedia.com) and Scene7 (www.scene7.com). The people will buy more yet. How it all ends who knows.

  13. Jon says:

    The truth is that cosumers are a herd and herds are easier to manipulate than individuals. Ads, ads, ads!!! And guess what, even newer spiffier ads are coming down the road from people like Preface Media (www.prefacemedia.com) and Scene7 (www.scene7.com). The people will buy more yet. How it all ends who knows.