Economic forecasts are predictions of an economy’s future. Business and governments use them for a variety of purposes, including planning, budgeting and investment decisions. They also help inform the public about the current and projected state of an economy.
Economic models generally take as their inputs a set of historical data and some assumptions about the future. The model then performs a computation to generate a forecast for one or more variables. The results are reported in reports that typically include information graphics and commentary to explain the forecast and its implications. Several different types of models are available, from relatively simple regressions to sophisticated dynamic stochastic general equilibrium models used by central banks.
Another commonly employed method of making economic predictions is based on the regular behavior of individual data series as they are sequenced over time, viewed as statistical time-series. This approach is sometimes called “sequence-regression” analysis. It is often applied to the analysis of a wide range of economic problems, such as forecasting consumption expenditures, unemployment rates or interest rate policies.
A number of judgmental methods are also used to produce economic forecasts. For example, a number of publications combine the forecasts of a group of individual or institutional forecasters to produce a single average forecast for a broad range of economies and variables. The Survey of Professional Forecasters (SPF), published by the Federal Reserve Bank of Philadelphia, is an example of this type of aggregated forecast.