Pinning down a forecast in an ever-changing world
Jerry Epperson -- Furniture Today, January 25, 2010
Twice a year, I feel like a crash-test dummy, running myself repeatedly into a concrete wall that I know I cannot break. Why? Because it is the three-week period in which I calculate and produce our five-year furniture and mattress forecast.
First, I have to read and hopefully understand no less than seven different economic forecasts, the primary one being from the University of Michigan, a mere 60 pages long. We have purchased this forecast for more than two decades, and it is excellent, in my opinion.
Second, we use the Michigan forecast for 2009-2011, and a blend of other forecasts for 2012-2013, to create a national scenario. We then calculate our model to see how our industry — retail, and production of wood, upholstery, mattresses and metal furniture, both domestic and imports — should perform. The hope is that if the economic outlook is accurate then we should know how our industry will fare.
Simple? NO.
The reason we dread this is the futility of the effort. Every forecast is the best we can purchase and interpret as of a certain point in time; in this case, about midday on Dec. 23, 2009. Once we push “send” on our computers, we brace for change. At any point after that, the model may not reflect events like interest rate changes, currency fluctuations, strikes, wars, legislation, tsunamis, raw material price changes, or airplanes flying into tall buildings, just to mention a few.
We did not predict the financial collapse our nation experienced in September of 2008, but no one else did either.
You see, the forecast is doomed to be wrong because of the unseen and unpredictable. Even so, we keep trying.
We also dread what is entirely too predictable — the critics. We have no problem with anyone voicing an opinion or a criticism but all too often, they criticize with the benefit of hindsight and they are not willing to put their forecasts in print for the rest of us to see how accurate they would be.
I not only work on the detailed Mann, Armistead & Epperson five-year forecast, I work with others on their forecasts based on their best assumptions. None of us take this lightly. It is a serious, time-intensive effort, using the best people and data we can find.
If you accurately predicted the actions of Sept. 11, 2001, the severity of the housing collapse, the lack of credit in 2008, the dot-com mess, Nixon's resignation, the inflation experienced in the 1970s, and that Paris Hilton would become a recognized celebrity, please help us forecast.
All this is so frustrating. It makes me want to quote my favorite big-boned philosopher, Eric Cartman, “Screw you guys, I'm going home.”
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