The Big/Little Picture
The Start:
I’m sure everyone knows the difference between Macroeconomics and Microeconomics. Forecasting, which is used in economics, also can be done on a macro and micro level. I will first discuss how forecasts of the United States economy influence business. Then I will talk about how I use a specific forecasting tool at my internship.
The Big:
As the United States economy continues to sputter, economists continue to change their corresponding forecasts. Accurate forecasting can become difficult with the current philosophical division in Washington. Forecasting the economy right now is like a meteorologist predicting the weather a year from now. In both cases, uncertainly makes the forecaster less confident in their prediction. The attached link is an article that did an effective job of explaining how economists forecast the United States economy. At the end of the article, it talked about how businesses can still benefit from using economic forecasts. Do think businesses can benefit from the forecasts of the economy? Or, do you think using economists’ predictions is like using a prediction from a meteorologist a year in advanced?
The Little:
Virtually every business uses some level of forecasting to make decisions. My company is no different; they have a whole department for planning future transactions. As a tax intern, I was given the task to work on a spreadsheet that predicts an important value on the balance sheet. The spreadsheet is designed to manipulate the most recent values from our accounting software to predict a current balance sheet value. As discussed earlier, the depressed state of the economy is forcing the United States to make fiscal policy changes. On the World stage, it is no different. Many countries have either recently changed, or are planning to change their fiscal policy, specially segments of their tax laws. Of course, due to time constraints, it is nearly impossible to adjust the spreadsheet I work on to reflect these changes. This ultimately results in a less accurate number for future decisions for the company. Do you think it is the depressed economy, or just the nature of fiscal policy that will cause inaccuracies to my forecast?
The End:
As you can see, forecasting the economies effect on business is an imperfect science. It is never easy, but the level of uncertainly in Washington makes forecasting the economy that much harder. It is my belief that this uncertainly is causing many companies to be conservative. When companies are conservative they hire less, and take less risk. This causes a country to have a higher unemployment rate and lower rewards, or GDP.
Article: http://www.ehow.com/about_6559853_economic-issues-affect-financial-forecasts.html
It’s not an easy task to forecast into the future, but economists do a fairly good job at it. Economists forecasts change based off of events that happen through out the year and new data that needs to get factored in. I think business that use economic forecasting is a good idea. It is always good for a business to have some idea of what the outlook for the economy will be that way they can kind of know what to expect and not over/under produce goods or services.
Looking at the big picture is vital to making up the company’s own forecast. The big picture will directly or indirectly end up affecting the factors that a company has to deal with. As you exemplified in your post, the economy would be a big picture factor because it is the backbone of our American society.
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