When it comes to retail, 'tis the season of artifice and deception. The retailers offer fake discounts via phony markdowns, and the news media breathlessly covers shopping as if it were an Olympic event.
The Wall Street Journal calls it “retail theater” through which “bargains will be a carefully engineered illusion.” The news reports, the surveys, the measures of foot traffic, all serve to create a false impression of a huge shopping frenzy. You better join in, or you will get left behind! Only you won't. These reports are meaningless. Don't fall for the nonsense.
There are several offenders, the most egregious of which is the Holiday Consumer Intentions and Actions Survey put out by the National Retail Federation (NRF). These surveys do not measure retail sales — they measure “consumer intentions.” History teaches that humans are terrible judges of future behavior. They have no idea what they're going to do tomorrow, let alone next month.
But the NRF survey ignores that simple fact, asking consumers to recall what they spent last year and to anticipate what they will spend this year. The first question is a wild guess as to past behavior; the second question is unreliable speculation about future behavior. Take the net difference between these two wild guesses and — voila! — you get this year's holiday sales numbers.
Only you don't. As the numbers show unequivocally, the data have zero correlation with actual retail sales numbers. Some years, it is off by a lot; other years, it is off by even more. The 2009 survey projected an unprecedented collapse in spending by 43 percent; instead, holiday sales rose year over year by 3 percent.
My favorite piece of mathematical comedy is this line in the NRF methodology: “The consumer poll has a margin of error of plus or minus 1.0 percent.” That may be the funniest thing any statistician will read this holiday season.
The NRF report is just the frosting on the headless gingerbread man cookie when it comes to bad holiday shopping data. Runner-up is the ShopperTrak Retail Foot Traffic report. It is a squishy head count of shoppers at “retailers, mall developers and entertainment venues.” Its claims about foot traffic hardly correlate with actual sales. Yet it is reported as if it were important or accurate.
The retail kudzu arrives earlier each year. Shopmas now begins on Thanksgiving Day. Apparently, escaping their families on Thanksgiving Day to go buy them gifts is how some Americans show their affection for one another. Weird.
For those who cannot wait for the official retail data to come out, look at data that actually measure retail sales. I have not found a perfect substitute, but MasterCard SpendingPulse looks pretty good. It is based on the credit card giant's “near-real-time purchase data” and runs through sophisticated models.
Pardon me for being such a curmudgeon, but this is not what Thanksgiving is supposed to be about. Faux data, ginned-up excitement and consumerism have nothing to do with giving thanks for whatever bounty may have come your way this year.
Instead of getting sucked into the nonsense, you could always wait a month for the December retail sales data. If you do that, however, you might have to spend time with your family, giving thanks.
Ritholtz is chief investment officer of Ritholtz Wealth Management. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture. Twitter: @Ritholtz.