You claim 94.7% accuracy in your economic forecasts. That’s an impressive number, but how can I trust that it will continue in this tough economy?
First, since many clients ask, let us tell you how we arrive at our 94.7% forecasting rate. We track how the forecasts have performed four quarters out from when we made the projection. If results are within the defined data trend parameters of the forecast range, then it is scored as 100% accurate. If the actual result falls outside of the forecast range after four quarters, then the percent deviation is subtracted from 100%. All results are totaled to arrive at an aggregate. Then we divide by the number of forecasts. The calculation gets a bit tricky depending on the nature and extent of data revisions, data being rebased, and whether or not the pre-revision rate-of-change trajectory was altered, but the 94.7% forecast accuracy rate holds up year after year.
And here’s why you can expect us to maintain this rating over time:
- We are constantly evaluating what indicators and statistical inputs are working best.
- We utilize our extensive knowledge of business cycles and approach every analysis knowing that no two cycles are ever exactly the same.
- We put business cycle activity into the larger context of secular trends, giving us greater predictive accuracy.
Thank you for the feedback it is very helpful. I feel we are taking the right actions now and we are being realistic about the length of time we may be in this situation. We use your forecast and data to make sure we are ahead of the business cycle and opportunistic with those competitors that aren’t so proactive.