Economic Forecasting

December 19, 1986

Report Outline
More Variables than Veritie
Contrasting Techniques
An Uneven Track Record
Special Focus

More Variables than Veritie

As 1986 draws to a close, economic forecasters are drawn up their predictions for 1987. Government agencies currently are releasing countless data reflecting their projections about the course of business activity in the coming year, information that will be incorporated in both the Reagan administration's 1988 budget proposal and congressional consideration of taxing and spending policies. At the same time, private forecasters, ranging from individuals to the large econometric firms are issuing their year-end forecasts. Their subscribers—mainly corporations—will look to these figures in deciding whether to expand or scale back spending and production plans for next year.

Forecasters describe changes in output of goods and services, inflation, interest rates, unemployment and other elements of the economy in painting their picture of the future. But the numbers may be deceiving. Forecasters rely on data that describe past economic performance, which may not reveal changes that are currently under way, much less those that will occur months from now. Government policy decisions on such key issues as taxes and spending are among the other imponderables that often skew the forecasters' predictions.

“I would suggest you go out and ask a bunch of people who know no more than the others and average it out,” said Edgar R, Fiedler, chairman of the Conference Board's Economic Forum, in a facetious allusion to forecasting inaccuracies.

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Economic Analyses, Forecasts, and Statistics