Philadelphia Fed Forecasting Surveys: Their Value for Research
Croushore, Dean, Business Review (Federal Reserve Bank of Philadelphia)
The Federal Reserve Bank of Philadelphia has conducted both the Survey of Professional Forecasters and the Livingston Survey for 20 years. Both surveys (of private-sector forecasters provide researchers, central bankers, news media, and the public with detailed forecasts of major macro-economic variables. The surveys have been made available to the public at no charge, reflecting the public education mission of the Federal Reserve. The surveys have proved helpful for people who are planning for the future. They have also provided useful input into the decisions of policymakers at the Federal Reserve and elsewhere. This article will provide an overview of the surveys and discuss the ways in which researchers have used the surveys.
The Livingston Survey is the older of the two Philadelphia Fed surveys. It started when Joseph Livingston, a Philadelphia newspaper reporter, wanted to get a sense of what forecasters thought would happen to the economy in the next year, and so he began sending a survey to prominent economists around the country. He continued to publish his survey every six months, gathering and reporting on the forecasts and tracking their evolution over time. His survey, which was the only collection of private-sector forecasts of macroeconomic variables in the country at the time, gained a national following. Economic researchers began using the survey extensively in the early 1970s to test theories about people's expectations. By 1978, Livingston was having trouble keeping up with all of the requests for the data and turned the data over to the Philadelphia Fed's Research Department, which organized the data in a computer database and made them available to researchers on request. Livingston still ran the survey, but the Philadelphia Fed compiled the results and maintained the database. Livingston provided the first report of the survey's results in his column in the Philadelphia Inquirer. When Livingston died in 1989, the Fed took over the administration of the survey and carried on Livingston's legacy. Since the advent of the Internet, the Fed has made all of the historical Livingston data available on its website. (2)
The Survey of Professional Forecasters began as the idea of Victor Zarnowitz and others at the American Statistical Association and the National Bureau of Economic Research. They began the ASA/NBER Economic Outlook Survey in 1968 and successfully carried it out for 22 years. The survey was similar to the Livingston Survey in that it asked private-sector forecasters for their projections for the next year for major macroeconomic variables. But the ASA/NBER survey was conducted more frequently than the Livingston Survey (quarterly instead of semiannually), asked for quarterly forecasts (instead of Livingston's half-year forecasts), and included some unique questions about the probabilities of different outcomes, instead of asking just for the point forecasts (that is, the most likely outcome) reported by the Livingston Survey. In 1990, the ASA/NBER turned the survey over to the Philadelphia Fed, which rechristened it the Survey of Professional Forecasters (SPF). (3)
Why do people need forecasts? When planning their personal budgets, people need to know what: the forecast for inflation is; when planning production, firms need to forecast demand for their products; when buying and selling financial assets, investors need to forecast both inflation and future interest rates; and when setting policy, government analysts need to know how the economy is likely to fare in the future. Forecasting surveys can help all of these groups figure out the most likely outcomes for the variables that most concern them.
The Philadelphia Fed's surveys are not the only surveys of forecasters. A well-known U.S. survey is the Blue Chip Economic Indicators, which was started by Robert Eggert in 1976. The Blue Chip concept was to publish forecasts monthly (compared with the quarterly SPF and the semi-annual Livingston Survey) and to publish the names of each forecaster along with his or her forecast (forecasters for both the SPF and the Livingston were anonymous). …