An economic forecast is a prediction of future economic conditions and trends. Having such information can be useful for everyone, from governments and businesses to individuals. It is often used to help make decisions about investing in companies or establishing budgets for the year ahead. Economic forecasting is carried out by many institutions, including national governments and central banks, research firms and consultants, companies and industry groups, as well as academics and international organizations like the International Monetary Fund, World Bank and OECD. Forecasts can be made at a high level of aggregation, such as for GDP or inflation, or at a more disaggregated level, focusing on specific economic sectors or individual firms.
Forecasts are based on many inputs, from a survey of people’s spending and investment plans to complex mathematical models that look at historical relationships between variables. Some economic measures, such as stock market prices and interest rates, are easier to forecast than others, such as GDP or unemployment, McCracken said. Obtaining data inputs is important, he said, but even more so is a knowledge of how those variables interact with each other and what causes them to change.
Those factors can include things like changes in technology, a resolution of trade tensions and even natural disasters. Having a solid understanding of what’s happening now and what might happen in the future is an essential part of any business strategy, he said. “Having insights into the future helps you plan for it, and it also allows you to learn from your mistakes in the past,” he said.
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