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BMC-module-1-3-notes-GDP-forecasting.txt
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10:17 AM 8/16/2024
BMC 1.3: Forecasting GDP
Analysts forecast upcoming indicators.
Using WECO (World Economic Calendar):
- The relevance column (R) indicates the volume of alerts set up by users for each indicator
- SURV(M) is the analyst consensus forecast for that indicator
- Right click SURV(M) -> ECOS (economist estiamte) shows how this consensus is calculated
Light yellow diamond: actual result
Inflation target: 2%
Roles of economists in estimation:
1. They maintain estimates of what they think key indicator values will be in the short-term.
These show up in SURV(M)
2. They form opinions on the longer-term future for the most important economic statistics.
ECFC (economic forecasts function):
- Real GDP growth (Real GDP YoY%)
- Inflation (CPI YoY%)
- Unemployment (Unemployment %)
Long-term forecasters have to take into account demographics, economic policies, and technology.
These long-term economic estimates are used as inputs to financial models.
----
A material change in economic estimates from dozens of analysts
often signifies that an important turning point has been reached.
ECFC example: UK growth estimates [for 2014] changing through the course of 2012 and 2013
Useful to plot low, median, and high forecasts
ECFC example: Brexit Referendum on 23 June 2016, and took place on 31 Jan 2020
Sharp drop in growth estimates after the referendum
ECSU (Economics Surprise Monitor):
- 40 handpicked economic indicators for the US economy
Columns: Name, most recent release date, actual value, surprise (% diff from analyst expectation)
- The aggregation of these surprise% values is the Bloomberg US Economic Surprise Index (ES1 Index?)
Economic surprises may be correlated with SNP 500 annual % return as a 6-month rolling average
[seems oddly specific - why 6-month rolling average?]
Note: Inflation gives the % difference between real and nominal GDP
Bloomberg Terminal Functions:
NH: shows a real-time scroll of news headlines
ECST: provides economic data with context and customizable graphs
ECFC: displays economic forecasts for identifying trends in global economics
GP: price chart used to identify trends and market patterns
ECOD: provides details of reports and economic events int he Economic Calendars (ECO) function
ECOS: provides full details behind economist estimates for calendar releases
ECSU: estimates changes in the economy and financial markets
ECTR: provides an interactive trade flow map that displays export and import values
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Summary:
1. Real GDP growth is the main measure of an economy
2. More timely indicators offer the most insight to investors
3. Indicators can foretell turning points in the economy
4. Economic forecasts are the foundation of many financial models
5. Interpretation of these statistics can lead to profitable trading opportunities
John Maynard Keynes: "When the facts change, I change my mind."
"Econometric models work beautifully, until they don't."