Wednesday, November 24, 2010

That AAA travel estimate

November 16th, AAA announced that it expected a larger number of Americans to travel during the Thanksgiving holiday -- 11.4 percent higher -- than in 2009.  It estimates that 42.2 million people will travel more than 50 miles from home over the holiday.  These numbers have been widely cited in news stories throughout the nation in the run-up to tomorrow's holiday. 

IHS Global Insight conducted the detailed forecast for the automobile association.  This is the same firm used by the US federal and many state governments to do economic forecasting, an especially perilous task these days.  Global Insight has provided signifiant cover for Keynesian policies of late.  For example, in 2009, it declared that
The policy response to this crisis needs to be big, bold, and rapid.
It's provided analytic cover for the Obama administration in estimating that the ARRA "stimulus" was "creating" 2.5 million jobs.  The NYT said earlier this year:
Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs.
Okay, IHS Global Insight is a shill for its numerous Big Government clients.  So what?  How is this relevant to its AAA work?

The holiday travel forecast methodology is based on two components.  One component is IHS Global Insights's own knowledge, or as it's described [page 2]:
The economic variables used to forecast travel for the current holiday are leveraged from IHS Global Insight. These data include macroeconomic drivers such as employment, output, household net worth, asset prices including stock indices, interest rates, housing market indicators and variables related to travel and tourism, including prices of gasoline, airline travel and hotel stays.
("[E]conomic variables...leveraged from IHS Global Insight"?  In English translation, this seems to mean, "Trust us.  We're the experts.  Don't ask us any questions.")

The second conponent is data from a telephone survey of the traveling public.

Let's consider the economic assumptions in the AAA holiday travel forecast.

First [page 33],
The economy is inching its way along on a path to recovery, and Americans are, on average, better off this year than last year.
Second, see Appendix 1 [page 35], the IHS Global Insights October 7, 2010, US economic forecast summary, which contains the following nuggests of wisdom:
Crawling Forward.  We have pegged third-quarter growth at 1.5%.  [Let's see what the "revised" number eventually is, shall we?]
A full double-dip remains a possibility (25% odds), but not the most likely outcome. Credit conditions are starting to ease—albeit gradually. Growth in emerging markets is strong and looks sustainable.  [Propagating the myth that we recovered rather than the truth that we have been in deep shit the whole time and it's only going to get worse.]
Major fiscal stimulus shot its bolt last year, and now has such a bad image that—justifiably or not—another big package is politically impossible.  ["Justifiably or not"?!]
The growth outlook is worse than the Federal Reserve has been assuming, and the deflation risks greater.  [Correct on the first part only.]
Carefully couched, not all of their assumptions are bad.  But the broad implication is that we're in a "slow ascent out of recession" (as Appendix 2 is entitled [page 36]).  This is wishful thinking, not careful assumption making.

The economic overview is cited to buttress IHS Global Insights's forecast of higher travel numbers over the present US holiday.

But what does IHS Global Insights's survey research data from 479 in-depth interviewed traveler-respondents say?
The question, "Has the economy impacted your travel plans this Thanksgiving holiday?" was asked of survey respondents, and an encouraging 65 percent of respondents reported that their holiday plans have not been impacted by the economy. Of the 35 percent with plans that have been impacted, they were asked to provide an explanation of how the economy has impacted their travel plans. The most common responses surrounded frugality. Respondents plan to travel in thrifty ways which include staying with family, shortening their trips, staying closer to home, etc.
35% is a staggering number.  It certainly does not support on its face a claim that more Americans than ever are traveling "over 50 miles" during the holiday.

The AAA Thanksgivings holiday travel forecast may be accurate.  But then again, police estimates of a riot may be too.

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