Forecasting techniques Barometric methods Base: the future can be predicted on the basis of present events Statistical indicators are used - selected time series, which serve as barometers of economic change
Forecasting techniques Barometric methods Types of indicators: Coincident indicators are indicators that change approximately in phase with the economy as a whole, which is the measure of economic activity (the number of people employed in industries, production and trade) Anticipatory indicators reflect the future trend change in the overall economy (the change in the cost of materials, the index of stock prices, the quantity of money in circulation, contracts or commercial agreements) Lagging indicators - indicators, lagging behind economic development (The price of labor, the average Bank rate, commercial and industrial loans)
Anticipatory indicators are not always really faster There are two improved statistical indicators, Their use is very limited…. . which are often used in forecasting: Anticipatory indicators show only the direction of changes, but nothing is said about the significance
Forecasting techniques Barometric methods Compound indexes: Are the weighted average of several individual anticipatory indicators Diffuse indexes: Reflects the percentage of anticipatory indicators, which grow in a certain time Aids of comprehensive study and analysis of economic phenomena
Compound indexes: Are the weighted average of several individual anticipatory indicators Leading indicators index (LEI) monthly average index the following leading indicators: production orders; applications for unemployment benefits; indicators of money supply M; the average working week; a building permit; the prices of the main stocks; orders for durable goods; the consumer confidence index. The index of leading indicators characterizes the development of the economy in the next six months. As a rule, the output values of the index in the negative area for three consecutive months is an indicator of a slowing economy of the country.
Diffuse indexes: Reflects the percentage of anticipatory indicators, which grow in a certain time ЕХ: if there are 10 leading indicators and seven of them increase at the present time, the diffusion index will be 7/10 or 70% If the diffusion index is > 50%, then economic recovery is expected , if < 50%, then - economic downturn
Forecasting techniques Collection of opinions and reviews of goals Subjective forecasting method: Individuals survey about expectations and intentions regarding future economic activity
Forecasting techniques Collection of opinions and reviews of goals 1. the goals of managers reviews regarding the share of the cost of production and industrial equipment 2. financial and purchasing plans of consumers reviews 3. Reviews of the leaders plans about inventory EX: the Index of business activity The consumer sentiment index
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