A forecast is an estimate of future economic activity or trends. A well-known type of economic forecast is the one of gross national product (GNP), which is the overall measure of economic welfare in a nation. A number of other forecasts are also produced for specific industries or for specific time periods. For example, a company that produces automobiles and related goods might produce its own forecast of sales of such goods for the next year or so.
A variety of methods are used in preparing economic forecasts, including econometric models that use historical data inputs to predict future variables. Forecasts are typically reported in reports that contain information graphics and commentary to help the reader understand the predictions.
Various studies have attempted to improve the accuracy of economic forecasts. These studies have included everything from determining the historical relationships between economic variables to forecasting using a computer, such as an artificial intelligence system. Some of these studies have involved incorporating information about human behavior into the forecasting process.
Some of the most useful economic forecasts are based on judgment rather than statistical models. For instance, when predicting the economic effects of some unusual current event, an analyst may decide that an ordinary statistical model will not provide the best result. Such decisions often require considerable experience or intuition on the part of the economist. The challenging nature of the task, as well as the subjectivity of human behavioral factors, often leads many rational people to regard economic forecasts made by governments with healthy doses of skepticism.