Forecasting techniques. Barometric methods

1.

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

2.

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)

3.

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

4.

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

5.

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.

6.

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

7.

Forecasting techniques
Collection of opinions and
reviews of goals
Subjective forecasting method:
Individuals survey about
expectations and intentions
regarding future economic
activity

8.

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