It's been another hard winter here in the U.S., and since the beginning of last year's Christmas season, we've heard a lot of warnings that cold weather would "cool" the North American public's urge to spend. When the nation's leading retail stores reported dour sales on their biggest shopping day of the year -- "Black Friday" December 26, 2010 -- the mainstream financial experts pinned the carrot on Frosty's face. Here, the following news items from the time recall the tale:
- "Christmas Weekend Snow Killed Holiday Spending" (MarketWatch)
- "Blizzard Freezes Crucial Post-Xmas Sales" (CNN Money)
- "Blizzard Hurst Retailers. Shoppers Stay Home. It's like throwing a party and nobody coming." (Bloomberg)
Problem is, under the "heat lamp" of facts, this logic melts right away: There is no consistent correlation between falling snow and falling retail sales.
Take, for instance, the two-year period of 2003 to 2004. During that time, the north eastern United States endured one of the most bitterly cold winters since Wooly Mammoths roamed the earth. It brought us the "Great Holiday Blizzard of 2003" -- the biggest snowstorm on record for Boston and Baltimore, followed by a slew of snow storms in late December 2004 that dumped "18-inches of snow along the eastern seaboard." (AP, December 28, 2004.)
Yet -- December 2003 saw the strongest holiday retail sales since 1999, an uptrend that continued to gain traction into 2004 and prompted can't-beat headlines like this one:
"Day after Christmas sales too hard to resist" (Elizabethton Star) -- AND -- "No Sign of Holiday Slump For [U.S.] Retailers" (New Zealand Herald)
Then there's the opposite weather case to consider: The unseasonably warm winter of 2006. This meteorological anomaly was well documented in the news via pictures of blooming flowers and roller-bladers in Central Park. According to records, it was the first snow-less November and December in New York City since 1877. Retail sales should have "bloomed" too, right? Yet the end of December 2006 saw the smallest Christmas sales gain in a year, well below expectations.
For a visual illustration, the chart below plots the year-over-year change in retail sales since 1999. I've inserted a bright, blue box around the 2003-2006 period to reinforce the rising trend in 2003, and sharp reversal in 2005-6. (Chart courtesy of calculatedrisk.blogspot.com from the website: Recession.org.)
Back to this winter -- since December, the United States has endured not one, but two "Snowmageddon"-like blizzards that crippled plane, automobile, and foot traffic in all but ONE of the 50 states. Yet on February 3, the 28 major retailers tracked by Thomson Reuters revealed a LARGER-than-expected rise in same-store sales gains for January. In the words of one news source:
"Weather, which had been the big scare factor, had less impact than many feared." (Wall Street Journal)
In the end, the performance of retail sales does not seem to driven by the drop or rise in outside temperatures. Could it be that our shopping patterns, just like our investment decisions, rise and fall with the waves of social mood?*
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*P.S. To learn more about social mood and socionomics, consider attending The 2011 Socionomics Summit in Atlanta, GA, on April 11. Details.