Economy economic activity 2006: Forecasting and reality

The Ifo Institute constantly examines the accuracy of its own economic forecasts and discusses the reasons for any discrepancies between its forecasts and reality. In 2006 Ifo correctly forecasted the basic tendency of economic activity in Germany. As one of the first economic research institutes, in December 2005 Ifo increased its forecasted GDP for 2006. As expected by the Institute, a strong increase of aggregate output occurred in 2006. The accelerated pace for the year as a whole was correctly forecast by the Ifo Institute. The intensity of the upswing and the labour market developments were even underestimated by the Ifo Institute in December 2005. The average increase in consumer prices was precisely predicted by the Institute.