Economic forecast is the process of analyzing data and using econometric models to generate projections for the economy. The results are published in reports that often include information graphics and commentary to help explain the model outputs. Models can be used to analyze a single variable or multiple variables, and they can be applied over short or long horizons. The models may use historical data inputs or a combination of other factors, such as demographics and global supply and demand. There are many different ways to approach economic forecast, and no model is perfect, so judgment also plays a role in the process.
For the US, the outlook remains constructive despite a recent slowdown in the labor market (Chart 1). The Fed’s rate cuts and other stimulative policies have been effective in driving consumer spending, but household savings have increased as interest rates remain high. This limits the Fed’s ability to reduce short-term interest rates. Meanwhile, longer-term interest rates—such as 30-year mortgage rates—are expected to rise slowly as investors demand higher compensation for taking the risk of lending money to the government.
For the rest of the world, growth is slowing as a result of the rise in trade barriers and elevated policy uncertainty. The outlook could turn even worse if tensions escalate, global financial conditions tighten, or armed conflicts intensify. The global economy needs a reset to rebuild trust, restore fiscal discipline, and revive job creation. Otherwise, the future could bring slower growth and a lower chance of shrinking extreme poverty.