Economic activity in 2007: forecasts and reality

For many year the Ifo Institute has critically examined its own economic forecasts and has discussed the reasons for differences between its forecasts and reality. In 2007 the basic economic development forecasted by the Ifo Institute for Germany was largely accurate. The upswing since 2005 continued in 2007 in spite of the massive increase in the value-added tax rate. The dynamics of the upswing were even underestimated somewhat in the Ifo December 2006 forecast. Private consumption, however, did not increase in 2007, on average - as we had predicted in December 2006 - but fell.