An economic forecast is a prediction of the performance of an economy or its components. These predictions are usually based on the behavior of historical data. They are then interpreted by economists and used to make economic decisions. A variety of methodologies are used to predict economic outcomes. Some of these are historical pattern based while others use relationships between contemporaneous variables to predict economic performance.
One of the most widely used methods is econometric models. These are essentially mathematical equations that apply a computational process to a series of data inputs. They then provide outputs that are often summarized in reports. These are often the main economic forecasts produced by central banks and other large institutions. Other popular economic forecasting techniques include regression analysis, time series, non-linear models and combinations of these.
In the US, our baseline forecast calls for GDP growth to slow on average through 2026 as tariff-induced cost pressures, persistently elevated policy uncertainty and curtailed immigration crimp business investment, household consumption and wage gains. The risk to this outlook is skewed to the downside.
For ordinary Americans, a 1.5 percent growth economy means wages that stagnate, homeownership drifts further out of reach and retirement savings depreciate. It also means rising delinquency rates on credit cards and auto loans, making it more difficult to pay off debts. But even more ominous, it means that a slow economy makes it harder for families to buy homes, send their children to college and build wealth through asset accumulation.
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