What is a Consensus Forecast?
Consensus Forecasts are our bread and butter here at FocusEconomics, and lie at the heart of our entire product offering, be that PDFs, our online platform, or data solutions. Our entire team works with them on a daily basis. But what exactly are Consensus Forecasts? Read on to find out.
How are Consensus Forecasts calculated? We collect forecasts from hundreds of institutions on an ongoing basis, including most of the world’s key banks, public agencies and private consulting firms. Our in-house team of economists and data analysts then vets these forecasts to ensure their accuracy and up-to-dateness, and to avoid mistakes. Once through this quality control process, for a given indicator we calculate the mean average of the forecasts we have polled. This leads to one number you can rely on: the Consensus Forecast.
What are the data collections methods? Many of the institutions that we work with fill in our bespoke surveys with their latest projections. In other cases, we plug in to our analysts’ online databanks, or utilize PDFs or other report types. Our comprehensive internal quality control processes then ensure that data ingestion is handled smoothly and without mistakes.
What are the benefits of using Consensus Forecasts? Forecasting errors consist of two distinct elements: bias (a consistent deviation from actual outcomes, such as a habitual over-optimism) and noise (random variability). Among the professional forecasters we collaborate with, bias is minimal, yet even the most skilled forecasters still exhibit noise and do not always accurately predict outcomes. Consequently, depending on a single source of economic insight carries inherent risk. Our Consensus Forecasts minimize this noise and thus reduce uncertainty.
For instance, the panel of forecasters we poll for the Eurozone is the largest of any economy we cover. Over 60 institutions make up our Consensus: For GDP growth, this Consensus reduces noise by 88%. Similarly, our panel of 33 forecasters for Chile’s exchange rate cuts noise by 83%. These results align with extensive independent research showing that the performance of individual forecasters rarely beats the market consistently. Although some forecasters might excel in a given year, none consistently surpass the consensus across all economic indicators, year after year.
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Which macroeconomic indicators does FocusEconomics cover? Our Consensus Forecasts span dozens of economic indicators across the real, monetary and external sectors at the annual and quarterly frequency for 198 countries, as well as prices for over 30 commodities. In short: whatever economic projection you’re interested in, the chances are we have it covered. Want to know more about our offering? If so, don’t hesitate to get in touch.
Examples of Consensus Forecasts in practice: Below is our Consensus Forecast for Mexico’s real GDP growth, as visualized on the FocusAnalytics platform. The yellow bar signifies the Consensus Forecast, and the blue bars the spread of individual forecasters. For confidentiality reasons, the names of the individual forecasters are not shown.
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