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Absolute comparisons

Use quantitative data when it is available; be very careful to use the same units, to use a consistent scale, and to present the time lines consistently. A trap to avoid it assuming time is always linear. Check the data by seasons as well.

Use graphics to present data to your team, where the axes scales clearly display the units. Our eyes, the world's best computer, quickly spot the direction and shifts in magnitude over time.

If you have good sources of quantitative information, show as much historical data as you can. The rule of thumb is at least three to five years of history. No one I've worked with will guarantee the accuracy of forecast more than two years into the future. Accept that. Beyond two years, you will be guessing.

Airport Capacity Example

For example, consider the demand and capacity drivers impacting the aviation industry. The blue line is total passenger enplanements and the green line is total foreign travel enplanements, each with a linear extrapolation. The bars are added capacity for planned runways. One new runway can handle about 7.8 million passengers a year.

Airport Example

Current construction suggest future shortages as runway construction fails to satisfy demand, particularly domestic travel. As delays increase, it creates years of opportunity for firms providing alternate transportation or optimizing the current national airspace system.

As I prepared this example, I noted that most of the runway construction was not at the airports that support international travelers. There are opportunities here.

Total USA Retail Sales Example

Three charts about Total Retail Sales demonstrate why to drill down.

The first chart suggests retails sales are taking off; the second suggests gas is less "critical" in our spending decisions; but the third shows the retail sales growth rate is slowing down -- all from the same data.

Retail sales are returning to the slope of the historical trend, having lost 41 months after the end of the Great Recession. That is the financial news programs headline bit.

US Total Retail Sales and Total Retail Sales excluding gasoline sales
Click to see larger chart

Gasoline sales are also growing but not with the same slope. That is reasonable with a more fuel efficient fleet. The good news is more is being spent on other items than gas; the gap is widening. That is the next detail level down, looking at particulars.

US Total Retail Sale ex Gasoline Comapred to Gasoline Sales
Click to see larger chart

Last is the pace of growth. Compared to the same month the previous year, the rate of growth of US Retail Sales excluding Gasoline is trending down as is nominal Personal Consumption Expenditures.

Look at the average growth rate line since the February 2011 peak growth for Total Retail Sales ex Gasoline (horizontal red line) in the next chart.

In 2013, the Total Sales ex Gasoline are trending below the 5.6% average improvement for the last 32 months, inline with reduced personal consumption expenditures compared the last year.

Percentage of US Total Retail Sale Ex Gasoline to Nominal PCE
Click to see larger chart



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