An economic forecast is an estimate of future economic activity. It may be based on standard statistical techniques or it may employ judgment. The latter approach is usually based on the idea that, although economic theory determines the general outline of a forecast, the special circumstances of a given moment require some modification to the usual methods of analysis. Judgment may be based on experience or, more often, on unconscious bias. The resulting forecast cannot be subjected to the same kind of checks that are applied to those produced by more objective techniques.
A well-known example of this type of forecast is the Blue Chip Indicators, which is a survey of top economists from banks, manufacturing industries, brokerage firms, and insurance companies. The survey is published once a month and includes the individual forecasts of each contributor, as well as an average (or consensus) forecast. The Blue Chip Indicators have been in existence since 1976 and are now a widely-cited source of information about economic trends.
Long-range economic forecasts, particularly those of the overall economy, must make many more assumptions than shorter-range ones. These can range from demographic factors like population growth to more specific ideas about the introduction of new products. For instance, the famous argument of Thomas Malthus that bare subsistence would be the inevitable lot of mankind in the absence of a technology that could increase the food supply arithmetically — which would reduce the number of people needing to work for their living — is a form of economic forecast.
About the Author
