There are any number of scenarios where it would be incredibly helpful to have a crystal ball — from playing the lottery (or the stock market) to making lending decisions. While no one truly has the ability to see into the future, we can look to well-researched industry forecast data to better understand the economy.

Industry growth and forecast data are an integral aspect of Vertical IQ’s Industry Intelligence. Forecasting the industry is valuable to the process of understanding specific company projections, so we wanted to ensure we could provide the very best forecasting data available. That’s why we decided to partner with Inforum, an economic research and forecasting firm.

The premier source for economic forecasting data

Inforum is a nonprofit research organization founded in 1967 by Clopper Almon, now professor emeritus of economics at the University of Maryland. Vertical IQ currently works with two members of Inforum’s staff: Ron Horst and Troy Wittek.

Ron Horst, Ph.D., joined Inforum in 2001 as a graduate research assistant and is now the organization’s director of research overseeing research activities including model development and application of these models to policy analysis and forecasting. He is also chief software developer. He explains Inforum’s process:

“Inforum’s approach to macroeconomic and industry modeling presents an integrated and consistent portrayal of the entire economy, making extensive use of economic data published by a variety of government agencies. These data provide a portrayal of historical developments, and economic models help to construct consistent views of future developments. Rather than consider each sector in isolation, the approach considers each part as a component of the whole economy, with extensive linkages among industrial, household, and government sectors.”

Troy Wittek, MBA, M.S., is a senior economist at Inforum, collecting and analyzing statistical data for use in policy analysis, business planning, and academic research. He notes the many partnerships Inforum has formed over the years.

“I’m proud of how many relationships Inforum has built over its history, including a nearly decade-long partnership with Vertical IQ. Our unique modeling approach has made Inforum a trusted partner for a diverse set of research sponsors, assisting both government agencies and organizations in the private sector.”

The next best thing to a crystal ball

Inforum provides trusted, independent economic data and analytical tools for numerous government agencies. Their models have been used for analysis of proposed tax policies, tariffs, and trade agreements, as well as for environmental legislation, infrastructure improvements, port closures and other disruptions, immigration, defense spending cuts, healthcare finance, deficit reduction, and countless other scenarios.

So, why did we think it was crucial to include Inforum’s data on Vertical IQ? For starters, we like Inforum because of its goal to remain independent. So many forecasts are biased towards a particular cause.

Additionally, we knew that, similar to government agencies, the private sector can benefit from industry forecasting too, such as when comparing the growth of an individual business to its industry, providing valuable data to a prospective customer, identifying a potential niche industry to sell into, or advising a small business entrepreneur.

Here’s a real-world example: Let’s say you’re a bank lender with a commercial credit prospect in the medical equipment distribution industry. The prospect’s financial projections for their company predict that their revenue will grow 15% per year. Loan approvals (or denials) are based largely on financial projections, so you check the Industry Forecast section of Vertical IQ, and there, you find that Inforum projects that, on average, the medical equipment distribution industry is expected to only grow 3.5% annually.

Of course, these are national industry averages, so there will be outliers on either end of the revenue spectrum. But armed with this well-sourced forecasting data, you’re ready to have a more informed conversation with the prospect about how they expect to beat the industry’s average. It’s a fair question as part of a healthy credit analysis — and also to become a more trusted advisor to the customer.

Until we develop the ability to see into the future, we must rely on historical knowledge and analysis of current quantifiable data to make well-informed predictions. Using Vertical IQ’s Industry Forecast, with data from Inforum, is an easy way to get the latest trustworthy data about how an industry is expected to fair in the years to come.

How the Inforum LIFT Model works

The experts at Inforum utilize what’s called the Inforum LIFT (Long-term Interindustry Forecasting Tool) Model, which draws on annual economic and demographic data from government statistical agencies to simulate and to project future economic developments.

LIFT’s inter-industry modeling techniques analyze the U.S. economy in a novel “bottom up” format — examining the intersections of individual industries to understand the implications for the broader economy. Harnessing this forecasting data can improve business planning, government policy analysis, and the overall understanding of the economic landscape.

“Inforum models employ extensive data on all sectors of the economy,” explains Horst. “Each sector depends on other sectors, and each contributes to the overall economy. Macroeconomic measures, such as GDP and aggregate employment, are calculated from the activities of each component sector. In general, industries serve domestic markets including households, other businesses, and government, and many serve foreign markets as well. At the same time, each industry relies on other industries and foreign suppliers to satisfy operational and capital needs.”

Here is an example of how this modeling approach works for plastic products manufacturers.

First, Inforum analyzes the industry’s sector, which, for plastic products manufacturers, is manufacturing, particularly nondurable goods manufacturing.

Nondurable Goods Manufacturing sector components:

  • Textile Mills
  • Food Manufacturing
  • Beverage and Tobacco Product Manufacturing
  • Apparel Manufacturing
  • Leather and Allied Product Manufacturing
  • Paper Manufacturing
  • Printing and Related Support Activities
  • Petroleum and Coal Products Manufacturing
  • Chemical Manufacturing
  • Plastics and Rubber Products Manufacturing

Here are the manufacturing sector forecast’s primary drivers:

  • Price of crude oil
  • Manufacturing capacity utilization
  • Consumption and investment spending
  • Exchange rate

The next step is to analyze how the plastic products manufacturing industry’s growth will be uniquely impacted by these macroeconomic influences on the industry and industries upstream (suppliers) and downstream (customers) from plastic product manufacturers. For example, plastic and plastic resin are petroleum-based and their prices vary with the price of crude oil. High fixed costs for specialized machinery cause plastic product manufacturers to operate their plants for high-capacity utilization to spread fixed costs over more units.

Using this type of data within Inforum’s LIFT Model, we craft a comprehensive forecast outlook and examine recent trends for the plastic products industry. Each revenue forecast for the plastics industry reflects projections of quantities of plastics that will be produced and sold by the industry as well as the prices charged for those products.

Drawing these connections between the macroeconomy and activities occurring at the individual industry level provides valuable insights for credit analysis, risk management, and even as a value-add for nurturing existing relationships. It also encourages sales growth, helping users identify industry-specific opportunities and risks.

>> Learn more about Inforum’s economic models.

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