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Economic Indicator Forecast Essay

1528 words - 6 pages

Abstract"If you come to a fork in the road, take it." (Yogi Berra). The ambiguity of this popular quote seems to epitomize the pervading sentiment of economists in the U.S. and abroad; we are headed for global economic change. As tension and uncertainty mount in the Middle East, crude prices have run the gamut of consumer expectation, yet even now, nearly six years after 9/11, there remains a vast uncertainty when and where crude prices will settle. This paper will examine several economic indicators as each pertains to and/or is affected by the crude oil industry. Economic forecasts from numerous sources for each indicator are examined in an effort to develop an 18-month forecast specific to the crude oil industry.Crude Oil Economic Indicator ForecastIn an ever-changing world, analyzing historical data in an effort to glean some certainty about the future seems easy enough in theory: political and civil unrest historically result in revolution; scientific advancements historically result in a better quality of life. So what of historical macroeconomic trends? The Federal Open Market Committee in 2005 predicted moderate GDP growth, higher unemployment, and higher interest rates in 2006 based on historical data; they were very close on all accounts (Economic Advisory Committee, 2006). Nonetheless, Ben Bernanke noted in his testimony before Congress "… economic forecasting is far from a precise science, we have no choice but to regard all our forecasts as provisional and subject to revision as the facts demand" (Economic Advisory Committee, 2006). With this caveat firmly ingrained, this paper will examine several economic indicators and attempt to forecast future trends over a period of 18 months.Retail SalesThe National Retail Federation (NRF) released its conservative yet optimistic 2007 forecast in early January predicting slower growth in the retail sales industry (excluding automobiles, gas stations, and restaurants); the world's largest retail trade association expects retail sales will increase 4.8 percent from last year (Grannis & Krugman, 2007). According to its quarterly Retail Sales Outlook, subdued first-half economic growth will to give way to accelerated sales in the second half (National Retail Federation, 2007). This is the opposite of what occurred in 2006 (with a 6.3 percent overall increase), which began with higher-than-expected retail activity in the first two quarters followed by a sharp decline as the housing market stagnated and faltered and gas prices began to rise again despite leveling off after the summer traveling season. While retail sales on the whole are expected to increase due to purchases such as apparel, health and beauty products, and food and beverage, large-ticket home-related purchases such as building supplies and gardening equipment will continue to decrease as the home market softens further and energy prices remain uncertain (Grannis & Krugman, 2007).The National Association of...

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