Black Friday is all bunkum

I have noticed that every year there are predictions that holiday shopping is going to reach epic proportions. Then the news leaks out that Black Friday was not quite as big as expected. Then around the middle of December, people start blaming the weather for lagging sales. Then ... so what's the dealio?

According to Barry Ritholz over at Bloomberg [I have added some emphasis],

The manipulators at the National Retail Federation and elsewhere work hard to create a sense of consumer frenzy. Thus, I have dubbed the season between Thanksgiving and Dec. 25, "Shopmas."

Almost every year, the NRF forecasts a huge increase in holiday retail sales. Each year, the forecast is way off target. Aside from the terrible track record, there are other reasons to ignore the survey. As we noted earlier:

The methodology employed by the NRF survey is defective . . . The surveys bear no correlation relative to actual future retail sales. The conclusions reached (and repeated ad nauseam) are not supported by the data.
There are several reasons for this: First, people have no idea what they spent last year. No clue whatsoever. A surveyor stops someone on the way into a mall or other retail locale, asks them a few questions, the answers to which range between wild guesses and complete fabrications.

The annual event has devolved even further than the usual smoke and mirrors we discussed last year. As we said then, the NRF survey, bad methodology and all, is usually what the NRF pushes out to the media. However, in 2013, the people the NRF surveyed said they would spend 2 percent less than in 2012. Unhappy with those results, the NRF de-emphasized the survey, substituting an internal forecast of an increase. Note this wasn't because the survey is always wrong, but because it was negative. Instead, the NRF pushed its own holiday forecast of a 3.9 percent increase in sales.

This year, the NRF’s Holiday Consumer Spending Survey forecast is for an increase of 4.8 percent. Somehow, the NRF’s own holiday sales forecast wasn't mentioned.
Why was that? When the holiday survey suggests a sales increase, that becomes the screaming headline we see everywhere. When the survey is weak, as it has been the past few years, the organization pushes an entirely separate, never-negative, NRF forecast. Thus, the NRF uses whichever data source generates the desired forecast.

The NRF doesn't make it easy to find the results of its past predictions. Many of the links on the site that point to past surveys are broken, missing or simply not available. There is no historical data available in an easily accessible spreadsheet such as one might find at sites such as the Bureau of Labor Statistics or the Commerce Department. It took a bit of sleuthing, but we managed to put together the past decade of NRF holiday surveys:

The abysmal track record is why every year, I exhort investors to ignore this data series. It has no correlation to actual retail sales, tells us nothing about retail profits and gives us no insight into the holiday season.

I have become a curmudgeon on this. The NRF's methods are as intellectually dishonest as anything you will find in finance. As you gather with friends and family for the holidays, be present in the moment. Focus on your blessings and ignore the retail industry's attempts to generate a holiday shopping frenzy.

You will be much better off for it.