Holiday sales may not be so bleak after all

When the National Retail Federation (NRF) released its annual survey data last month from the Thanksgiving/Black Friday holiday period, it showed an 11 percent spending decline. And many economists couldn't believe what they were seeing. November's better-than-expected retail sales report released today shows they were right to be skeptical.

Based on the NRF's survey of 4,631 consumers, the trade group estimated total spending for the Black Friday weekend would be $50.9 billion, down from $57.4 billion a year earlier. In an email to CBS MoneyWatch, NRF spokeswoman Kathy Grannis pointed out that the figure "is not a forecast. It's a consumer survey." Still, many in the media and on Wall Street took the NRF's report as gospel, much to the chagrin of some.

"It was worse than useless," said Stuart Hoffman, chief economists at PNC Financial Services Group regarding the NRF data. "It was counterproductive [and] sent the wrong signal to the market."

According to Jim O'Sullivan of High Frequency Economics, the NRF's survey has proven to be a poor indication of the state of the holiday sales.

"The change from a year ago in the NRF survey has ranged from -3% to +16% in the last four years, yet the holiday sales-related parts of the retail sales report were up between 3% and 5% from a year ago each year -- based on November and December combined," he wrote in a note to clients earlier this month.

The NRF has forecasted a 4.1 percent increase in holiday sales overall, a figure it plans to "stick with at this time," said Grannis. Wells Fargo, though, expects holiday spending to top its 3.9 percent expected gain, according to Eugenio Aleman, senior economist at Well Fargo.

"There is no doubt about it," he said.

Unfortunately, there's no standard definition of "holiday sales," which according to economists can make it difficult to assess the accuracy of these forecasts.

"Going into today's report, I was worried that our forecast was too optimistic," said Scott Hoyt of Moody'sEconomy.com. "Now I am worried that it was too pessimistic."

Chris Christopher of IHS Global Insight disputed Hoyt's view, saying the forecasts are comparable. The NRF and IHS both use the same definition of the retail sales data that the Census Bureau uses. He expects a 4.2 percent gain in sales this season, which he noted will be "significantly stronger" that the past two years.

"If the NRF decided not to include grocery stores, then I would take grocery stores out," he said.

Evidence abounds that the holiday season will be a jolly one for many retailers. November's retail sales rose 0.7 percent, the biggest gain in eight months. Business is surging at many retailers. For example, luxury homegoods provider Restoration Hardware (RH) today reported results for its most recent quarter. Same-store sales, a key retail metric of sales at locations opened at least a year, rose 22 percent. Even Urban Outfitters (URBN), which has struggled lately, gave an upbeat holiday forecast.

Even though U.S. consumer confidence hit a seven-year high in November, many economists were surprised by how eager American shoppers were to spend ahead of the holidays.

"Shoppers came back to life in October and November after a pretty poor showing in September," Christopher of IHS wrote in a note to clients today. "Elevated levels of consumer confidence, lower gasoline prices, better job prospects, and heavy retail price discounting are supporting relatively strong consumer spending in the fourth quarter."