Forecasts & models
"There has been an intense debate about the rationale behind economic prediction or forecasting, triggered by a sequence of forecast errors before and after the financial crisis and more recently by a ‘surprisingly’ buoyant economy after the referendum on the UK’s membership of the European Union. Some economists argue that the value of a forecast is strictly related to its forecast accuracy. Others argue that what matters is less the forecast errors but the stories that are revealed by such errors. The former might be thought to relate the value of economic forecasting solely in terms of a statistical criterion and the latter to the need to concentrate on structural relationships between economic variables that will be subject to errors (or shocks) but which can be treated as stable. I argue that the forecast process is inherently subject to large errors, and so is a hazardous exercise, but that does not by itself invalidate the exercise because both the producers and consumers of forecasts understand that errors will occur. And this knowledge throws up a clear obligation for producers to explain errors before the fact by use of uncertainty or scenario plots and for consumers to treat the forecasts with caution."
Extract from "Why Forecast?" , commentary by Prof. Jagjit S. Chadha, National Institute Economic Review, February 2017, no239
In July 2018, following the introduction of a monthly GDP estimate by the ONS, we started a monthly tracker on the same day. The ONS estimate has a two month lag. NIESR supplemented this by continuing to provide an estimate for the previous month's GDP and, in addition, a full forecast for the quarter of publication.
The NIESR monthly GDP tracker is published at 14.00.
Until June 2018 NIESR produced its own estimates of monthly GDP. An archive of these estimates and the methodology used to produce them is available here.
The ONS produces an estimate of Average Weekly Earnings (AWE) with a lag of at least 40 days after the end of the reference month. From February 2019 NIESR has been producing and publishing short-term predictions for UK Average Weekly Earnings. As with the GDP Tracker, during some months NIESR will publish predictions of earnings some five months ahead of the ONS data release. NIESR’s new Wage Tracker includes predictions for regular pay and bonus payments for the whole economy, as well as forecasts for private and public sectors wages. The Wage Tracker exploits information from key macroeconomic indicators, including labour market trends, building also on information from monthly GDP nowcasts produced by NIESR’s GDP Tracker and survey evidence, such as labour costs in the manufacturing and service sectors from the Bank of England Agents Score.
When the output is brought together, Institute staff start to make some sense of what has happened and think about what might happen. The main tool for forecasting is the National Institute Global Econometric Model (NiGEM) but many other models are used to check assumptions and cross-validate projections. Details of subscription rates can be found on the NiGEM site.
The Institute is at the centre of the national debate on the measurement and understanding of business cycle fluctuations. We start this process at the fundamental level. The UK has some excellent long run data on economic progress and some of the basic facts of business cycle peak and troughs have been explored in earlier work at the Institute. Chadha and Nolan (2002) explored the long run of the UK business cycle and presented some stylised facts on duration and the cyclical behaviour of macroeconomic aggregates.
The National Institute estimates a daily series of premia in sovereign bond yields for the Advanced EMU, UK and US economies.
In May 2019 we launched a new Business Conditions Forum, comprising of chief economists and senior economists from major survey organisations, economists from the official sector, and NIESR economists with a special interest in the UK. The meetings, which will be held quarterly, will build on NIESR’s monthly Trackers for GDP growth and labour earnings by contextualising the quantitative results of the nowcast with the results of business surveys.
After each meeting (conducted under the Chatham House Rule) a summary of main findings will be produced and published under the tab on the left hand side