An economic forecast is a prediction of future economic activity. Typical economic forecasts are based on an analysis of past data, current trends, and a number of economic assumptions. Economic forecasts are often used by business firms and financial markets to develop plans for the future. Economic forecasts can range from broad measures of the economy, such as gross domestic product (GDP), to detailed forecasts for specific industries.
A leading technique for economic forecasting is to use time-series models that analyze past data and make predictions about the future. These models typically incorporate a number of assumptions and econometric techniques to calculate the relationship between the observed data and the underlying economic trend. The results of these models are usually reported in the form of tables and charts, but they can also be interpreted by using information graphics.
The most widely-known economic forecast is a projection of the total value of all goods and services produced by a nation, known as gross national product (GNP). These general forecasts serve as a framework for more detailed forecasts for specific industries. For example, the sales of many kinds of durable goods are closely linked to home construction and consumer spending. Forecasts for these components of the economy are generally much more accurate than are forecasts for individual companies. Long-range economic forecasts are particularly difficult to make, because it is impossible to know the rate at which people of working age will be born or die far into the future. In addition, the rate of growth in productivity will not be known with certainty until it has actually been experienced.