Repeat After Me: Spending Surveys Are Meaningless

Cue stage lights.

Pre-roll curtains.

AnnouncerIn 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  15 Oct 2007 | 08:48 AM ET

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1987 Crash Revisited

Rob Fraim is a reader of mine who puts out his own
amusing comments each day via email. On the 17th anniversary of
the 1987 stock market crash, he put out his recollections from that
day, and we are republishing them today, the 20th anniversary of Black Monday.

I found them so interesting that I suggested Rob (who is
blogless) post them here. He gladly agreed. Without further adieu, here
is Rob’s version of 1987 Crash Revisited

October 19 – the day that each year gives old-timers in this business a renewed facial tic and post-trauma flashbacks.

What?” you say.  “You mean you were actually there, Grandpa?  You remember the Crash of ’87?

Yes, I was, and yes I do.  Confirming rumors that I am, in fact,
older than dirt I note that I was in this business in 1987 – and had
been for a few years prior (I started in 1983.)

I was having dinner last week with a friend who runs a hedge fund
(another graybeard, although he looks younger than me) and we ended up
talking about 1987.  He had a great story about the whole thing (which
I’ll let him tell you about someday if you ever get to have dinner with

So I thought I would take a moment to reflect on my own Crash
Experience – and perhaps some of you will share your October 19, 1987
story (provided you’re not a whippersnapper who would be relating what
was on freakin’ Sesame Street that day!  I really hate you guys.
You’re svelte and unwrinkled and smart and energetic and I’m just
liable to whup you if you’re not careful.)    Maybe we’ll even get a
recounting of the aforementioned dinner tale from last week.  So if you
feel like it, drop me a note with your recollections.  If I get enough
to make it worthwhile, perhaps I’ll compile them for sharing.)

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