This morning, Steve Liesman on CNBC showed all of the National Retail Federation numbers for spending plans this holiday season. Increases of 22%, big numbers.

Unfortunately, Steve omitted to show how the actual data of the past years have lined up with the NRF forecasts. As was discussed this past Sunday in the Washington Post, the answer is not particularly well.

Indeed, when we look at how far off these surveys have been in the past, it makes one wonder why anyone should pay any attention to them at all.

In 2005, based on a survey on Black Friday and Saturday, the NRF forecast a 22% percent increase in holiday shopping based on surveys conducted over the Thanksgiving weekend. The actual results? Up just 1 percent.

The same foolishness resurfaced again in 2006, with an 18.9% sales increase forecast. Sales were actually up almost 5%.

In 2007, just as the recession was getting underway, the NRF forecast a 4% gain in sales. U.S. retailers “unexpectedly” dropped 0.4% in December 2007, the weakest holiday season since 2002.

Given the broad scale of the economic collapse in 2008, expectations were for a 2.2% sales gain; they actually fell 6%

They don’t just get it wrong to the upside; during severe weakness, they exaggerate losses to the downside. With memories of the economic collapse still  fresh, NRF’s 2009 Holiday Consumer Intentions and Actions Survey for holiday shopping reflected an awe-inspiring drop of 43% versus 2008. 2009 holiday sales actually rose ~3%.

Last year, 2010 Black Friday weekend sales rise were estimated at 9.2%; They actually gained 5.5%.

Anyone quoting NRF surveys but failing to show the actual results are doing their viewers a disservice.

Year NRF Survey Forecast Actual Holiday Sales
2005 22% 1%
2006 18.9% 5%
2007 4% -0.4%
2008 2.2% -6.0%
2009 -43% 3%
2010 9.2% 5.5%
2011 16.6% ??

Category: Consumer Spending, Data Analysis, Psychology, Really, really bad calls

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.

21 Responses to “Humans Are Awful at Predicting Their Own Behavior”

  1. HEHEHE says:

    You are telling me that a journalist the caliber of Steve Liesman would go on TV and parrot whatever he is told by whoever tells him? This is Steve Liesman we are talking about.

  2. BusSchDean says:

    Between inflation in some areas and sliced margins it is hard to imagine this being more than a ho hum profit season for retailers. The “factors” who by their debt will know soon after the first of the year.

    We still have quite a few shopping days but yesterday in NYC stores that I went to were quite. You could have been “bowling alone” in the aisles at Lord & Taylor (on the up side, they have decent bathrooms). Even B&N at Union Square was pretty quiet. Maybe it was the rain.

  3. And the “mortgage defaulters driving the shopping” meme makes its appearance

    Amazingly fact free . . .

  4. cgercke says:

    Not that I’m in the loop at all, but is anyone else hearing that retail has simply died after Black Friday and Cyber whatever?

  5. [...] But Barry says never mind that nonsense, people are really bad at forecasting their own actions.  (TBP) [...]

  6. scottinnj says:

    Listening to the NRF tell you how your peers are spending for the holidays is a like listening to DeBeers when they told you to spend 2 months salary on your engagement ring.

  7. dead hobo says:

    BusSchDean Says:
    December 7th, 2011 at 7:27 am

    Between inflation in some areas and sliced margins it is hard to imagine this being more than a ho hum profit season for retailers.

    reply:
    ———–
    Let’s go back to a time and place where in Econ 101, the concept of perfect competition was revealed and described. Some of the elements of perfect competition include homogeneous sellers, perfect information, no barriers to entry for sellers, and, consequently, low profit margins. Given the nature of retail, it would take a superior concept to achieve greater than average profits for one season, as competitors would flock to that concept for the next season. Thus, ho hum profits for any given season should always be the expected average.

    To the point about analysts being incorrect … That any analyst would lie, or even miss the target so egregiously is shocking! I think I may have to consider canceling my subscription to the internet.

  8. gms777 says:

    Today is December 7.

    I only learned last week that in the 1930s Patton was stationed at Pearl Harbor and wrote an air raid defense plan.

    According to this US Army website…”In his 1937 report dated June 3, he concluded Japan was willing and possibly able to attack Hawaii. His report detailed the following:

    1. This study is based on the inescapable assumption that complete surprise offers the greatest opportunity for the successful capture of these islands.

    2. Some of the Mandate Islands [noted above as the Carolines, Gilberts and Marianas], about which absolutely nothing is known, are only 2,500 miles distant, seven days’ steaming over the loneliest sea lanes in the world. Who can say that an expeditionary force is not in these islands now’

    3. Since becoming modernized, Japan has never declared war.”

    http://www.army.mil/article/49030/Patton_warned_of_Pearl_Harbor_attack/

    Some people are good at predicting. The problem is getting others to listen, pay attention, and take action. There’s an op-ed piece in this morning’s WSJ which quotes Gingrich warning of an EMP attack and a Wired magazine reporter poo-poohing the notion. Who ya gonna believe? Some Wired magazine reporter or dis historian politician guy?

  9. mathman says:

    You could have left the heading as: Humans Are Awful. We’ve been mislabelled as homo-”sapiens” but we’re by no means wise. Clever, yes, but in no way wise. We’re uncooperative, selfish, greedy, ignorant, destructive and polluting the entire biosphere that we need to survive. We won’t last much longer on the timescale of the planet. We’ve become a cancer BECAUSE we stopped being stewards of our home – rapaciously guzzling any and all resources to live “high on the hog” now, as opposed to being cognizant of our side-effects and over population and not looking out for the future of our species (instead of concentrating on the “glorious” living for a relative few).

  10. Petey Wheatstraw says:

    News flash: Bullshit is popular among dung beetles — they just can’t help it.

  11. Greg0658 says:

    starting the story .. I had the preconception its wishful thinking .. and why not hype for churn .. our system is all about build it, if it doesn’t sell – it will at some $, there is always the writeoff bankruptcy .. private profits / public losses

    that -43% number tho – didn’t fit above .. maybe reverse psychology .. scare all them its over .. so if they predicted +3% / would it have been -3%

  12. Orange14 says:

    I think we need to recast the famous Ronald Reagan quote here, “DON’T Trust; Verify.”

  13. [...] surveys such as this can be less accurate than we often assume, as Barry Ritholtz points out this [...]

  14. dad29 says:

    A Milwaukee-based retailer (Kohl’s) has a track record which is very impressive w/regard “same-store” sales over the last several years.

    Their numbers THIS year’s November were off ~4%. The only other time in recent history that Kohl’s had less same-store from one year to the next? Just after the Great Recession started.

    One month does not a warning make, but watching Kohl’s may be useful.

  15. David in D says:

    I think this article also shows the power of culture over our behavior. Holiday shopping is primarily a cultural activity with associated “norms” which drive our purchases; and has you can see from the table the norms are far more stable than analyst or personal projections.

  16. BusSchDean says:

    dead hobo: We could debate relative retail strategies and innovations that have come over the years but the biggest difference among retailers — whether Trader Joe’s or Aldi’s, both started by the same family — is execution. Perfect competition presumes they can copy each other’s strategy, which they generally can with some organizational pain and expensebut. But they do not execute equally well. Here is where the biggest difference lies and, hence, the road to above average profits for that industry. Clearly comparing margins in retail with those in software make little sense.

  17. VennData says:

    So, to advertise that “everybody” is buying must mean people are herd followers, trend followers. otherwise why would they do it?

    But if Austrian economics and GOP politicians are right, letting the economy sink by withdrawing fiscal demand is a “Good” thing because “investors” will step in an pick up the pieces, the opposite of ternd following.

    Why that didn’t work in the Great Depression … why every economic recovery following a slow down since has been accompanied by Keynesian stimulus … and nine straight quarters of growth, two million in job growth, and a doubling of the stock market in teh US just doesn’t fit the GOP media machine talking points.

    Maybe we should give the rich a tax cut, in exchange for all the sane policies the rest for the nation needs? …either that or DO NOT VOTE FOR REPUBLICANS. Those are our choices.

  18. [...] Trust real data not surveys.  (Big Picture) [...]

  19. dead hobo says:

    BusSchDean Says:
    December 7th, 2011 at 11:40 am

    dead hobo: We could debate relative retail strategies and innovations that have come over the years but the biggest difference among retailers — whether Trader Joe’s or Aldi’s, both started by the same family — is execution. Perfect competition presumes they can copy each other’s strategy,

    reply:
    ———
    Love Aldi’s. Like Trader Joe’s, but only for some things. Comparing Michael Kors to TJ Max allows one to explain why a large range of shopping options exist. It doesn’t explain XMAS sales projections and industry profit margins. I can buy a tablet computer for the same price from numerous outlets. I can predict prices won’t change much for a given season for a tablet computer unless mfgr allowances are involved. And, even then, all major sellers will offer the same discount. In the aggregate, industry sales may change based on incomes, expectations, and expenses. But industry profit margins will remain constant over time. Which was one of the implied objectives of the article.

    Given the turmoil in Europe and the news hype surrounding it, the simple fact retail is unaffected and may be increasing in a way that demonstrates a recovery from recession in the US is phenomenal. It helps explain Europe’s problems are considered to be local problems to a lot of people here. To me, this was a take away from the sales grid.

    Yes, technically speaking, perfect competition does not exist. As I recall, the concept was to be used as a frame of reference to actual industry models.

  20. MikeDonnelly says:

    Everyone needs to go back to the WSJ and take a look at the MASSIVE revision sent in by the NRF

    2011 was 16.6% in Barry’s article now 2.8%
    2009 was -43% now -0.5%

    Barry you gonna allow that w/out an explanation ?