Forget forecasting: You can't even begin to think about the Future if you don't understand the Present.
Case in point: Holiday Retail sales.
You may have overlooked the Black Friday weekend numbers, as the headline emphasis was on, well, how strong they were relative to expectations. On that Friday, we saw an 8.5% gain thanks to huge discounting and door-buster giveaways.
The thinking seemed to be "Sure, we lose money on each sale, but we make it up in volume!"
Amazingly, the cheerleading in the space seems to be abating, as the MSM is now clued into the problem -- and reporting it freely. The remarkably sanguinity we have seen over the years is no more.
courtesy of NYT
Consider the following articles on Consumer spending, sentiment, and retail sales:
Media Coverage Holiday Retail Sales
AMERICANS have grown much more pessimistic about both their own future and that of the economy, according to surveys being released just as the holiday shopping season gets going.
While it is unclear how much that pessimism will influence shopping, the pollsters are finding that fewer Americans say they are planning major purchases than at any time in recent years, and that the proportion expecting the economy will create more jobs is at its lowest level since 1974...
Most Americans are not pessimistic, with substantial majorities saying they expect economic conditions to remain about the same. But among those who see a change coming, there are now more expecting business conditions to get worse than better and more expecting employment to fall. Americans who foresee their own income rising still outnumber those who expect to see it fall, but the proportion expecting a decline, 11 percent, is the highest since mid-2003."
"Waning consumer confidence in November, reported by the Conference Board, may signal trouble ahead for consumer spending. Another troubling sign: house prices nationwide in the third quarter posted their biggest declines on record -- 1.7% from the second quarter and 4.5% from the year-earlier period, according to the Standard & Poor's/Case-Shiller index. Stone & McCarthy research economist Ray Stone tells Paul Lin the 4.5% decline in the S&P/Case-Shiller home prices data suggests we haven't seen the bottom in the softening real estate market, which may mean tough sledding for retailers.
The drops in consumer confidence "increase the risks heading into 2008," said Lynn Franco, director of the Consumer Research Center at the Conference Board, a nonprofit business-research group in New York. "But it remains to be seen in the next month or two as to whether these declines are more of a shock or if they're a recession signal."
"U.S. retailers, offering holiday discounts of 50 percent or more this week, may see profits erode even as customers flock to stores.
Wal-Mart Stores Inc. will mark down toys and TVs online through this week, while Kohl's Corp., the fourth-biggest U.S. department store, sold jewelry at 60 percent off during the first days of the holiday shopping season, which started the day after Thanksgiving, so-called Black Friday. Analysts said a lack of "must-have'' products in 2007 means retailers will rely on lower prices, threatening margins in the biggest quarter of the year.
Sales in November and December may increase at the slowest pace since 2002, according to the National Retail Federation, as rising fuel and food prices discourage consumers from purchasing higher-priced gifts. The NRF said shoppers each spent an average 3.5 percent less this year during the weekend after Thanksgiving."
BusinessWeek: The coming consumer crunch
"The long-awaited, long-feared consumer crunch may finally be here. That might not mean an economywide recession, but the pain for American households will be deep.
In recent years the U.S. mostly has seen narrowly focused downturns, where a few sectors are hit hard while the rest of the economy and financial markets remain relatively unscathed. In the dot-com bust of 2001, for example, tech companies and stocks took it on the chin, while consumer spending and borrowing sailed through without a pause. This time the positions will be reversed, as consumers tank while much of the corporate sector stays on track.
It's been a glorious run for the consumer. In the past 25 years, Americans have kept shopping through good times and bad. In every quarter except one since 1981, consumer spending rose over the previous year, adjusted for inflation. The exception was the first quarter of 1991, and even then the decrease was a mild 0.4% dip."
Even the NRF is somewhat chastened:
Black Friday Weekend Traffic up 4.8 Percent as Consumers
Shop for Smaller Ticket Items
--More Shoppers Helps Make Up for Lower Consumer Expenditures
By their standards, that is unusually restrained.
It’s December, and America Is Not in a Buying Mood
NYT, December 1, 2007
Consumer Gloom Adds to Recession Risk
WSJ, November 28, 2007; Page A4
Holiday Sales Miss Forecasts With Discounts in Demand
Bloomberg, Nov. 27 2007
The coming consumer crunch
Business Week 10:43 a.m. ET, Mon., Nov. 19, 2007