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The Key Takeaways
- St. Louis Federal Reserve’s report, released by the bank this week, shows how the economy can often deviate from forecasts made at the start of the calendar year.
- Forecasts have been off as much as one full percentage point in the past. But, unemployment forecasts tend to be more accurate.
- This time last year, economists expected GDP to be half of 2024's likely outcome.
The new year brings new economic forecasts. As analysts analyze data and trends to develop an economic road map for next year, they have been able to make new projections.
Economic analysts expect that the economy will grow, unemployment will be contained, and rates of interest to stabilise. A new report released by the St. Louis Federal Reserve indicates that the actual rates at which economic variables change may differ from predictions.
“Measuring the current state of the economy is difficult because data are backward-looking and often revised. As a result, economic forecasts are frequently wrong,” Charles Gascon & Joseph Martorana, economists.
In 2024, for example, the consensus among economists is that GDP will grow by 1.3%. Gascon & Martorana believe that the real results of the fourth-quarter are likely to be double what economists have predicted.
How have past forecasters performed?
This study looked at how accurate forecasts would be for a three-decade time period beginning in 1993.
Over that time, forecasters' estimates for GDP were off by as much as a full percentage point. On average, the researchers missed their mark by about a half percentage point on unemployment. They also miscalculated inflation estimates by as much 0.7 percentage points.
The analysts were more likely to produce biased results in their forecasts of the bond markets. Economists underestimated Treasury rates by almost half a point.
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