Over the next couple of weeks I will travel to many of Indiana’s cities to explain my 2014 economic forecast. I thought this might be a good place to explain the why and how of economic forecasts, along with a sneak peek at next year’s predictions.
A forecast is designed to provide the best possible prediction of economic activity in the future. Short-run forecasts are designed to predict the ups and downs of the economy, while long-run forecasts predict trends.
Economic predictions are designed to help policymakers craft budgets or program expenditures and businesses make investment decisions or plan inventory levels. Forecasts cannot be perfect, but even a poor forecast offers a good point from which to start budget negotiations or business planning.