Issue16_Pearson.pdf

8/10/2019 Issue16_Pearson.pdf

1/7FORESIGHTWinter 2010 Issue12

FORECASTINGINTELLIGENCE

Te numbers must be for months orquarters, not just years.

I gave preference to sources where theorecasters describe the views or assump-

tions underlying their numbers. Even

large macroeconomic models contain ex-ogenous variables that must be estimated

by the orecaster, such as uture fiscal pol-

icy or monetary policy estimates whichcan steer the course o the orecast.

Nine o the sources are financial institu-tions, six o which are based in the U.S.

and three in Canada. Te other our are

a Federal Reserveadministered survey, atrade association, a private company, and a

university. Perusing this set provides a va-riety o views and approaches rom expe-

rienced proessionals. All contain orecasts

or real GDP and some measures o infla-tion and employment or unemployment,

and 12 have interest-rate orecasts. Somegive projections or all the major GDP sec-

tors, and most include some housing- andauto-industry series. Te additional vari-

ables and level o detail vary considerably,

ofen reflecting differences in the ocus othe institution or orecaster.

You can use the first 12 sources to quickly

scan a range o current thinking and quan-titative orecasts or the U. S. economy in

the coming six to 10 quarters, and the only

cost to you is your time. I none o themhas a key variable or scenario o interest to

you, then the thirteenth one, the Fairmod-el, may be a way to meet your needs, but

it could require a bit more effort on yourpart.

A Bakers Dozen Free

Sources of Economic Forecastsby Roy Pearson

INTRODUCTION

In the Summer 2009 issue o Foresight, I

described Short-erm Energy Outlook,a report prepared by the U.S. Energy In-

ormation Administration and ound athttp://www.eia.doe.gov/emeu/steo/pub/

contents.html, as a source or ree nation-al and census-division economic orecasts,

available through their Custom able

Builder at monthly, quarterly, and annualrequencies.

Where else on the Web might a businessorecaster go or a ree proessional as-

sessment o the uture course o the U.S.economy? A Google search using the tar-

geted search [US economic outlook OR

US economic orecast 2010 filetype:pd ]yields over 1,500 possibilities.

THE BAKERS DOZENo save you some preciousorecasting time, I offer here a

bakers dozen o websites I visitregularly. Tis is hardly a com-

prehensive or unbiased list.

However, I did apply the ollowing five cri-teria in narrowing my selection.

Te forecast must be free on the Web,

eliminating subscription services rom

the list. It must be timely, updated monthly or

quarterly.

It must contain numerical forecasts for

key economic variables. I believe a ore-caster needs to see numbers, whether or

use in regression models or or evaluat-

ing the size o a judgmental adjustmentto time-series orecasts.


2/7www.forecasters.org/foresight FORESIGHT 13

Tese sources can be very helpul and can

improve your orecast accuracy, regardless

o the orecasting methods you use. Tinko them as 13 experienced proessionals

sitting around a table with you, who spendmost o their time analyzing and orecast-

ing the macroeconomic environment that

influences your customers and sales. Teirviews can help you decide the need or and

amount o judgmental adjustment in yourcompany orecasts. I youre uncertain

about which views are most likely to beaccurate, you can combine or average sev-

eral o them consensus orecasts can be

quite accurate. In more ormal modeling,you might use such sources to ormulate

constraints or top-down orecasting withtime-series methods, or or orecasted val-

ues or the independent variables in multi-variate models.

Forecasts from Six U.S.

Financial Institutions

Temes on the Economy, available month-

ly at Mesirow Financial at http://www.me-sirowfinancial.com/economics/swonk/

themes/default.jsp, has three pages o

commentary and a page with quarterly

orecasts or 34 variables or the comingyear, including 12 or GDP and its compo-

nents. Tere are nine vehicle-sales series,more detail than in any o the other sourc-

es. Temes is prepared by Diane Swonk, a

ellow and past president o the NationalAssociation or Business Economics; she is

one o the best-known and most respectedbusiness economists in the nation.

Northern rusts monthly U.S. Economic

Outlook and Interest Rate Outlook, athttp://www.northerntrust.com, has topi-cal commentary and quarterly orecasts

or 15 variables. Paul Kasriel, their chieeconomist, is noted or his orecasting ac-

curacy, and he requently offers a noncon-

sensual view.

PNC publishes a monthly National Eco-

nomic Outlook at http://www.pnc.com/

economicreports, which usually is our

pages o a bulleted executive summary orecent developments, a table with numeri-

cal orecasts or levels and/or changes or10 variables, and supporting commentary

and charts. One unique eature is orecasts

or the Case-Shiller Home Price Index.Te Outlook is the responsibility o Stu-

art Hoffman, also a ellow and past presi-dent o the National Association or Busi-

ness Economics, who has been cited manytimes or being among the most accurate

U.S. economic orecasters.

J.W. Coons Advisors, LLC at http://www.jwcoonsadvisors.com headed, not surprisingly, by James

W. Coons is an investment advisory and

asset-management company that pub-

lishes a two-page economic orecast eachmonth with brie commentary, charts, andnumerical orecasts or 22 variables, 11 o

which are interest-rate series. For our othe variables real GDP, nominal GDP,

corporate profits, and employment he

includes the projected levels as well as per-cent changes.

Monthly Outlook at http://www.wellsfar-

go.com/com/research/economics previ-

ously was the Wachovia product o JohnSilvia and Mark Vitner. Hal o the pub-lication is the U.S. outlook, the other hal

the international outlook. Te U.S. orecast

table gives orecasts two years out by quar-ters or 40 variables, including 11 or GDP

and its sectors, five inflation indicators,and nine interest rates. Wells Fargo Securi-

ties now publishes theMonthly Outlook.

MFC Global Investment Man-

agement seasonally publishesseveral economic outlooks,available at http://www.mfc-

global.com/resources.html, with periodic

updates between times. Te all U.S. Eco-

nomic Outlook by Bill Cheney and OscarGonzalez is nine pages, with extensive

commentary or the U.S. economy and fi-nancial markets. A eature I like is the page

o Risks to the Forecasts, with probability


3/7FORESIGHTWinter 2010 Issue14

estimates or the five risks. Tere are nu-

merical orecasts or 26 variables, includ-

ing eight or real GDP. Tere are 10 inter-est-rate series, six o which are interest-rate

spreads.

Forecasts from Three Canadian

Financial Institutions

I find it very worthwhile to examine U.S.orecasts made by analysts in other coun-tries. Tey can be very accurate and ofen

provide a different point o view that helps

to uncover missing pieces o the puzzle.Here I have selected three Canadian sites

that provide monthly commentaryand numerical orecasts by quarters

or a variety o U.S. series.

BMO Capital Markets Econom-

ics (http://www.bmonesbittburns.com/Economics) publishes a monthly North

American Outlook with extensive com-mentary about the U.S. economy as well

as the Canadian economy and includes a

selection o U.S. numerical orecasts. Sepa-rately, you can download a U.S. Economic

Outlook page, updated regularly with theull U.S. orecasts by quarters or the next

two years. Te page contains orty-our

variables, with eighteen U.S. GDP series. Italso has orecasts or the current account

balance and its merchandise and non-merchandise components.

Scotiabank publishes a Global ForecastUpdate and a Foreign Exchange Outlookat http://www.scotiabank.com/cda/content/0,1608,CID8339_LIDen,00.html.

Most o the Global Forecast Update eco-

nomic projections or the U.S. are by cal-

endar years, but in the financial-marketstables you will find quarterly U.S. GDP

orecasts and a dozen U.S. interest-rate andspreads series. Te Foreign Exchange out-

look contains more commentary about theU.S. economy and monetary policy, along

with exchange-rate orecasts or the next

three, six, and 12 months.

Te Royal Bank o Canada, in RBC Eco-

nomic Research at http://www.rbc.com/

economics/forecasts.html, publishes Fi-

nancial Markets Monthly and a quarterlyEconomic and Financial Market Outlook

with economic and financial market ore-

casts or Canada, the United States, andother key countries. Financial Markets

Monthly has financial and economic com-

mentary relating to the U.S. and gives U.S.interest-rate, inflation, and real GDP ore-

casts. Te quarterly Economic and Finan-cial Market Outlook includes discussion o

the U.S. economy and provides quarterlyorecasts or 35 U.S. series, including 14 or

GDP and its components and 12 or inter-

est rates and spreads. I you are in a rush toget only numbers, there are tabs or jump-

ing directly to the tables with the U.S. eco-nomic orecasts and the interest rates and

exchange rates.

Four More Forecast Sources

Te National Association o Realtors pub-

lishes a monthly orecast table, availableat http://www.realtor.org/research/re-search/reportsstatistics, without any ac-companying commentary. I go there regu-

larly or the detailed orecasts o housing

sales and starts by type and housing prices.

Te table also includes GDP, employment,income, inflation and interest-rate ore-casts, which I compare to those at other

sources when deciding how to use the

housing orecasts. One interesting eatureis that the table includes quarterly ore-

casts or consumer confidence, a driver orhousehold spending.

Te Financial Forecast Center,

at http://www.forecasts.org/

index.htm, is unique among thebakers dozen because its orecasts

are obtained using artificial intelligence neural network models without any

judgmental inputs or adjustments. Tere

are several dozen financial and economicseries to choose rom, including many you

will not find orecasted anywhere else, aswell as many o the interest-rate, exchange-

rate, and general-economy series ound at

the other sites. Six-month-ahead orecasts


4/7www.forecasters.org/foresight FORESIGHT 15

are available or ree, which meets our se-

lection criterion; you can also pay $29.95

to have access to the 36-month orecasts. Ido, or the un o it as well as to

have an interesting alternative.

Te Federal Reserve Bank o

Philadelphia administers and

publishes the quarterly Survey of Profes-sional Forecasters, obtainable at http://www.phil.frb.org/research-and-data/.

Te text o the report gives the quarterlyconsensus orecasts or a ew key variables,

along with probability distributions orthe orecasts by years. Te tables attached

to the report give the median orecasts by

quarters and annually or 22 variables, in-cluding nine or GDP and its components.

Each issue also includes the respondentsestimated probabilities or a negative

quarter or real GDP in each o the com-ing quarters and their answers to special

questions.

Te final selection is Ray Fairs Fairmod-el site at Yale University, online at http://

fairmodel.econ.yale.edu/. Te U.S. model

is a large-scale econometric model, re-

estimated each quarter, with the quarterly

orecasts or the next several years and themodel itsel reely available to everyone.Te quarterly U.S. Forecast Memo, over

20 pages, provides a ull explanation o the

values selected or the exogenous variables(such as fiscal policy), and includes tables

with the recent history and orecasts orselected variables, with levels and percent

changes. Tere are dozens o variables inthe Memo, with both nominal and 2005

dollar values or the GDP components.

I you do not see the variables you want,you can run the ull model, on their site

or downloaded and run in EViews, andextract the historical data and orecasts or

any variable in the model. For example, the

U.S. Model contains flow-o-unds vari-ables; I download and run the model in

EViews to access household flow-o-undsvariables to use in my Virginia retail-sales

models. Furthermore, i you happen to

disagree with Fairs assumptions about thetiming or level or an exogenous variable,

such as spending related to the stimuluspackage, you can change it and rerun the

model to get orecasts consistent with yourviews.

RECOMMENDATION

My advice is to spend a morning read-

ing through this group o sources, even iyoure already using some o them. Tis

enables you to see their similarities anddifferences and i and how you might use

them in your orecasting process. Also, takeparticular note o those orecast sites that

contain commentary, since they give you

examples o well-regarded orecasters ex-plaining their views to a general audience.

Some o those views and commentariesdiffer markedly, one rom another. Since

you, too, have to explain your orecasts in

a clear and credible way, these sources maygive you some ideas or improving your

approach.

I search the surace Web and deep Web

regularly or good, ree orecasting sites

that meet the criteria Ive described here.Im sure there are some good ones used by

Foresightreaders that I may have missed.I you have any to suggest (as long as you

dont pay to access them as, or example,

a member o an association or as a sub-scriber), please send me an e-mail with the

website addresses, and I will compile themor a ollow-up article in the uture.

Roy Pearson is Chancellor ProfessorEmeritus at the Mason School of Business

of the College of William and Mary, wherefor three decades he taught forecasting

in the MBA program and still teaches a

seminar course. He continues to be an

active forecaster of the Virginia econo-

my and its businesses. Another of Roys

specialties is ecient Internet searching,

and he has given presentations at sever-

al professional meetings and conducted

corporate workshops on using the Internet in forecasting.

[email protected]


5/7

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Documents

Issue16_Pearson.pdf