Economic Indicator Forecast

Economic Indicator Forecast

The six economic indicators of housing starts, mortgage rates, retail sales, interest rates, personal income and the foreign exchange rate. Will discuss each economic indicator and compare and contrast two different 18-month forecasts for each. The differences between the forecasts will be analyzed and the reasons why we believe one forecast over another.

Housing Starts

The home building industry has been doing very well. This is in part because of the availability of lower mortgage rates. In January and February of 2005 home sales were doing well, however they declined in March. April didn't make up for the March decline, but it still was not bad, as housing starts rose 11%. May was another good month.

Looking forward eighteen months UCLA economists are forecasting that the housing market will slow down for the remainder of 2005. "The UCLA analysis predicts housing starts, now running about 2 million units annually, are outpacing demand and will start to decline late this year, slowing to a 1.6

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million rate by the middle of 2006" (Kirchoff, 2005).

According to the PAR Economic Review, economists are predicting a fall in housing starts to 1.8 million for the rest of 2005 and 1.7 million in 2006. "Now in most parts of the nation, supply has caught up with demand" (De Rooy, 2005)

In comparing the two forecasts for the same time period we can see that the predictions are very close. There is only a difference of .1 million between the two forecasts. Both UCLA and Jacob De Rooy, Ph.D. from the PAR Economic Review agree that housing starts will drop.

Team B tends to agree that housing starts will drop in the next 18 months. This is because mortgage and interest rates are forecasted to rise by the end of this...