July 15, 2010
The Congressional Budget Office (CBO) regularly evaluates the accuracy of its economic forecasts by comparing them with the economys actual performance and with others forecasts. Such evaluations help guide CBOs efforts to improve the quality of its forecasts and are also intended to assist Members of Congress in their use of the agencys estimates.
Since publishing its first macroeconomic forecast in 1976, the Congressional Budget Office (CBO) has compiled a forecasting track record that is comparable in quality with that of the Administration and that of the Blue Chip consensus. In particular, the accuracy of CBOs two-year forecasts between 1982 and 2008 paralleled that of the forecasts published by the Blue Chip consensus and the Administration over the same period (see Table 1 on page 11). The accuracy of CBOs five-year projections also generally corresponded to that of other forecasters (see Table 2 on page 12). Comparing CBOs forecasts with those of the Blue Chip consensus suggests that when the agencys predictions of the economys performance missed by the largest margin, those errors probably reflected difficulties shared by other forecasters in predicting turning points in the business cycle.
CBOs forecasting record provides a measure of the uncertainty underlying forecasts under normal circumstances. However, the current degree of economic dislocation exceeds that of any previous period in the past half-century, so the uncertainty inherent in current forecasts probably exceeds the historical average.