MarketShare Quarterly Newsletter: "Building a Better Forecast"

Building a Better Forecast

Many organizations, both public and private, rely on some type of forecast to plan, but what turns a good forecast into a better forecast? The Economics Center has created forecasts of employment, income tax revenues, property values and tax revenues, and sales volumes, to name a few, to assist in the planning and decision-making of various clients. While a forecast itself may seem straightforward, the process of gazing into the future and making a determination about what it will look like can be complex.

Often a forecast relies heavily, if not solely, on the past values without fully considering the influences of other factors. Also, since forecasts essentially rely on historical patterns, they generally work well if the future unfolds similarly as the past did. If, however, a major unforeseen event occurs, a forecast will likely perform poorly. Unfortunately, we know that the future will likely unfold differently than the past, and decision-makers are facing this dynamic environment. Having an understanding of the economic system becomes crucial in helping leaders and decision-makers understand and communicate why a forecast may differ from reality, or even anticipate that difference.

Understanding the economic system may also allow the construction of a more dynamic forecast tool that can begin to account for fundamental changes in underlying conditions. Such flexibility also allows the user to run "alternate scenarios" for contingency planning. Thus, developing this deep understanding of the economic system in which a forecast is operating offers more than just the forecast itself. The user need not rely simply on a number spit out of a magic black box.

After the forecast tool has been developed, we continue to work with clients on how to best interpret their forecast results and adjust assumptions as they change.

We recently developed a TIF property value forecast model for Deerfield Township, which they now successfully use to make better informed decisions.

To read more about how the Economics Center considered the economic system to make a flexible tool for its Commercial Property Value Forecast, visit Building a Better Property Value Forecast.

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Interested in a free Webinar about our Commercial Property Forecast tool? Let us know by filling out this form and we'll set up a date and time that is convenient for you.

Contact the Economics Center to discuss how we can build a better forecast for your organization or with questions about our other products and services.

by Jennifer Pitzer, Research Associate