An economic forecast is a prediction of future economic outcomes. An economic forecast can be useful in a variety of ways. For example, an accurate forecast can help businesses save money on supplies or increase revenue by planning ahead.
Several types of economic forecasting methods exist, ranging from the straightforward statistical time-series approach to the use of mathematical models. Many economists employ a combination of these techniques.
The first published estimates of the actual values of most macroeconomic variables are usually revised significantly within a month and, often, multiple times in subsequent years. For these reasons, the comparison of different economic forecasts is typically based on their relative quantitative accuracy.
However, the measurement of such accuracy is not without its complexities. For example, a given forecast may simultaneously involve the prediction of several variables, such as gross domestic product, interest rates, and various measures of employment, unemployment, and price inflation. These variables are frequently related to each other in complex ways, and estimating the relationship between them requires knowledge of their past behavior that may not be available or even identifiable.
In addition, the economic consequences of political decisions—such as imposing new tariffs or reducing investment and spending—are not immediately apparent in the data. Thus, it is often difficult to determine the causal direction of the effect on economic growth and the degree of uncertainty in forecasts involving policy changes.