the conference board of canada 10/01 communication strategies for economic forecasts and policy...
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The Conference Board of CanadaThe Conference Board of Canada
10/01
Communication Strategies for Economic Forecasts and
Policy Simulations
Economic Modelling and Forecasting Project in Ukraine
October, 2001
The Conference Board of CanadaThe Conference Board of Canada
10/01
An Appropriate Communications Strategy is Key For Success
Preparing an economic outlook or policy simulation is of little value if there is a failure to effectively communicate the results
The Conference Board of CanadaThe Conference Board of Canada
10/01
The Guiding Principles
Understand the Audience Define your Message Understand the Forecasting Tool Know the Material
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10/01
Applications of Macroeconomic Models
Baseline Economic Outlooks Alternative Scenarios Shock-Minus-Control Analysis Policy Simulations
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic Outlooks
Understand the Audience Define the Message Understand the Forecasting Tool Know the Material
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic OutlooksUnderstand the Audience
It is essential to tailor communication to the needs and expertise of the audience
Try to put yourself in the shoes of your audience
Seek feedback on the effectiveness of the communication from the target audiences
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic OutlooksGovernment Sector: Typical Audiences
Internal Senior Management Peers in Other Departments Private Sector Senior Management Private Sector Analysts Media The Public
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic OutlooksPrivate Sector: Typical Audiences
Internal Senior Management Customers: Senior Management Customers: Analysts Media
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic OutlooksUnderstand the Audience
Audiences can usually be safely grouped together if they have similar needs and similar levels of expertise
Review your assumptions about your audiences
Effective communication begins with a thorough understanding of the audience
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic OutlooksDefine the Message
The key is to have a clear understanding of your message
Usually three to five Key Messages The Message must be tailored to the
needs and characteristics of the audience Context is Crucial
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic OutlooksUnderstand the Tool (I)
Macroeconomic Models are only one tool used to prepare economic forecasts
Other tools include time series analysis, leading indicators and ‘rules of thumb’
The model is not a perfect reflection of reality.
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksUnderstand the Tool(II)
Econometric Model forecasts are based on a set of assumptions
The assumptions are partly embodied in the forecasts of the exogenous variables
How are you forecasting the exogenous variables? Judgement? Satellite Models?
Assumptions are also embodied in adjustments to the stochastic equations when they are unable to capture special events ( e.g., strikes, policy changes).
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksUnderstand the Tool(III)
Identify the Forecast Assumptions that are important for your audience
Context is crucial The key forecast assumptions will depend
upon your key messages and your audience The key assumptions must be
communicated to the audience up front.
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksUnderstand the Tool(IV)
You will never be perfectly accurate Don’t spend time talking about the tool --
only discuss the tool in response to questions or in technical forums
Keep the discussion focussed on key assumptions and key messages
Don’t be afraid to admit to failure -- be prepared to discuss what went wrong
NEVER cling to an outdated forecast
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic OutlooksKnow the Material
Be able to defend the key assumptions Know which assumptions are critical Be able to trace the causal path from key
assumptions to important outcomes Discuss risks and assign probabilities Risks can be used to develop alternative
scenarios Anticipate Questions
The Conference Board of CanadaThe Conference Board of Canada
10/01
Economic OutlooksTypical Communication StructureI. HighlightsII. Key MessagesIII. Exogenous Assumptions - discussed -defendedIV. Causal Links to Key OutcomesV. RisksVI. Conclusion that repeats key messages
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksGovernment Sector: Typical Audience
Senior Management
Characteristics: No time Sensitive to political implications of
outlook Risk Sensitive Low level of technical expertise
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksGovernment Sector: Typical Audience
Senior Management
Needs: Economic outlook for budget planning Economic outlook for policy design Economic outlook for political “heads
up”
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksGovernment Sector: Typical Audience
Senior Management
Hardcopy Communication Design: Brief: two to three pages No technical content; no economic jargon No time for much discussion around
assumptions or causal links Give greater than normal weight to Risk
Assessment
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksPrivate Sector: Typical Audience
Customer Analysts
Characteristics: Time is available Moderate Degree of Technical Expertise Skeptical regarding forecast accuracy Little interest in technical details
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksPrivate Sector: Typical Audience
Customer AnalystsNeeds: Timely forecast for their planning cycle Warning of adverse economic
developments In-depth analysis for briefing their senior
management Machine readable data for custom reports
The Conference Board of CanadaThe Conference Board of Canada
10/01Economic OutlooksPrivate Sector: Typical Audience
Customer Analysts
Hardcopy Communication Design: Publication: twenty pages of in-depth
analysis plus executive summary Careful defence of assumptions In-depth tracing of causal links Careful assessment of risk
The Conference Board of CanadaThe Conference Board of Canada
10/01
Policy Simulations Understand the Audience Define the Message Understand the Tool Know the Material
The Conference Board of CanadaThe Conference Board of Canada
10/01
Policy SimulationsDefine the Audience
It is essential to tailor communication to the needs and expertise of the audience
Try to put yourself in the shoes of your audience
The Conference Board of CanadaThe Conference Board of Canada
10/01
Policy SimulationsGovernment Sector: Typical Audiences
Internal Senior Management Peers in Other Departments Often Confidential
The Conference Board of CanadaThe Conference Board of Canada
10/01
Policy SimulationsPrivate Sector: Typical Audiences Internal Senior Management Customers: Senior Management Customers: Analysts Media
The Conference Board of CanadaThe Conference Board of Canada
10/01
Policy SimulationsDefine the Message
Key messages are normally the impacts of the policy change
Status quo is a policy option and often provides the baseline for impact measurement
Provide Alternatives Analyze Risks to create boundaries around the
impact Be Sensitive to the Political Context
The Conference Board of CanadaThe Conference Board of Canada
10/01
Policy SimulationsUnderstand the Tool (I)
Macroeconomic models are the tool of choice to generate policy simulations
Other tools exist. The model is not a perfect reflection of
reality.
The Conference Board of CanadaThe Conference Board of Canada
10/01Policy SimulationsUnderstand the Tool(II)
Econometric Models are aggregated and coarse; reality is disaggregated and detailed.
A careful understanding of the structure and dynamics of the model is crucial
This understanding is partly based on standard shocks
Modelling a policy initiative often requires adjusting existing equations
The Conference Board of CanadaThe Conference Board of Canada
10/01Policy SimulationsUnderstand the Tool(III)
Avoid the use of judgement Watch for unintended consequences;
example: Canada doubles taxes on cigarettes and smuggling explodes
Markets work Try to anticipate surprises Provide alternatives
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10/01
Policy SimulationsKnow the Material
Be able to defend the modelling of the policy changes
Be able to trace the causal path from key assumptions to important outcomes
Be able to discuss risks with assigned probabilities
Buttress policy recommendations with evidence from other tools
The Conference Board of CanadaThe Conference Board of Canada
10/01The Communications Strategy for Economic Outlooks at the Conference
Board of Canada (I)
Audiences Customers: Senior Management Customers: Analysts Media
The Conference Board of CanadaThe Conference Board of Canada
10/01
Audience: Customers, Senior Management
No time Risk Sensitive Low level of technical expertise Need outlooks to critique business plans
received from staff
The Conference Board of CanadaThe Conference Board of Canada
10/01
Audience: Customers, Analysts
Time is available for analysis Moderate level of technical expertise Need outlooks to prepare and update
business plans and brief senior management on latest developments
Some need data in a very timely fashion and in machine readable format
The Conference Board of CanadaThe Conference Board of Canada
10/01
Audience: Media
Work to immediate deadlines No time for analysis No technical expertise Need one key message delivered in a
fashion easily understood by the general public
The Conference Board of CanadaThe Conference Board of Canada
10/01
The Communications Strategy for Economic Outlooks at the Conference
Board of Canada (II)Communication Vehicles (Chronological Order) On-line data delivery Forecast Executive Summary delivered on-line Forecast Executive Summary mailed Outlook Publication mailed continued….
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10/01
Communication Vehicles (Chronological Order)
Press Release Technical Forecasting Seminar Economic Outlook Conferences
The Conference Board of CanadaThe Conference Board of Canada
10/01
Communication Vehicle: On-Line Forecast Data Delivery
Audience: More sophisticated analysts in government and working for large corporations
Needs fulfilled:- timely access to information- machine-readable data which
can be fed into an automated business planning process
The Conference Board of CanadaThe Conference Board of Canada
10/01
Communication Vehicle: Forecast Executive Summary Delivered On-Line
Audiences: a) More sophisticated analysts in government and working for large corporationsb) Senior Management with on-line expertise
Need fulfilled: timely access to summary description of the outlook
The Conference Board of CanadaThe Conference Board of Canada
10/01
Communication Vehicle: Forecast Executive Summary Mailed
Audiences: a) Analysts in government and working for large corporationsb) Senior Management
Need fulfilled: summary description of the outlook
The Conference Board of CanadaThe Conference Board of Canada
10/01
Communication Vehicle: Outlook Publication Mailed
Audience: -Analysts in government and working for large corporations
Need fulfilled: in-depth analysis of the outlook used to tune business plans at the sectoral level and justify business plans to senior management
The Conference Board of CanadaThe Conference Board of Canada
10/01
Communication Vehicle: Press Release
Audience: Media
Need fulfilled: ability to provide important information to their customers
The Conference Board of CanadaThe Conference Board of Canada
10/01
Communication Vehicle: Economic Outlook Seminars and Conferences
Audiences: Senior Management; Analysts; Media
Need fulfilled: ability to interact personally with senior Conference Board Staff
The Conference Board of CanadaThe Conference Board of Canada
10/01
Communication Resources at the Conference Board of Canada
Forecast Specialists On-line support staff Editors Layout designers Mailroom Spokespersons Media Relations Conference Support Staff
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10/01
Communication Training at the Conference Board of Canada
Writing Skills Presentation Skills Media Training
The Conference Board of CanadaThe Conference Board of Canada
10/01
An Example of an Outlook Presentation
Audience: Financial Planners - moderately sophisticated - need the outlook for planning purposes - need the ability to ask questions - risk sensitive
- special interest in interest rates and the exchange rate
The Conference Board of CanadaThe Conference Board of Canada
10/01
Key Messages About the impact of the terrorist attack About the probability of a full-blown
recession About the importance of Confidence and
the high degree of risk around the outlook
The Conference Board of CanadaThe Conference Board of Canada
10/01
Tragedy,Confidence & The FuturePlanning for a Very Uncertain 2002
CS Co-Op and CS Alterna Bank Strategic Planning RetreatSeptember 29, 2001
Paul M. DarbyDirector, Economic Forecasting
The Conference Board of CanadaThe Conference Board of Canada
10/01
What We Will Talk About Economic growth is very slow— but full-
blown recession very unlikely How will that affect your customers and
business? The importance of Confidence The outlook is risky
The Conference Board of CanadaThe Conference Board of Canada
10/01
Prospects Outside Canada 2002 Extreme uncertainty after terrorist attacks
U.S. slowdown a reality, but no full-blown “R” in 2001; growth strengthens in 2002
Japan remains mired in difficulties
Europe just holding its own
The Conference Board of CanadaThe Conference Board of Canada
10/01
Some Basic Facts About September 11, 2001 Terrorist Attack Huge loss of life will affect many thousands Total losses in the range of $60 billion, three
times L.A. earthquake or Hurricane Andrew Economic aid pledged so far will cover most
of the financial losses Service sector hardest hit with little recovery
of losses
The Conference Board of CanadaThe Conference Board of Canada
10/01
United States: Real GDP Growth(annual per cent change)
Sources: Regional Financial Associates; The Conference Board of Canada.
-1
0
1
2
3
4
5
6
92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
U.S. Consumer Confidence(1985=100)
Source: The Conference Board Inc.
85,0
95,0
105,0
115,0
125,0
135,0
145,0
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jne Jly Aug Sep
The Conference Board of CanadaThe Conference Board of Canada
10/01
Canada’s Outlook 2002 Highlights Modest growth of about 2.0 per cent Interest rates up Q3/02 onward; C$ weak Monetary and fiscal policy highly stimulative Negative risk is far higher than normal
The Conference Board of CanadaThe Conference Board of Canada
10/01
What is A “Full-Blown” Recession?Quarterly GDP Growth Rates—Canada 1989-1993
Source: The Conference Board Inc.
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
89:1 :2 :3 :4 90:1 :2 :3 :4 91:1 :2 :3 :4 92:1 :2 :3 :4
The Conference Board of CanadaThe Conference Board of Canada
10/01
What’s in Our Current Outlook?Quarterly Growth Canada 1999–2002
Sources: The Conference Board of Canada; Statistics Canada.
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
99:1 :2 :3 :4 00:1 :2 :3 :4 01:1 :2 :3f :4f 02:1 :2 :3f :4f
The Conference Board of CanadaThe Conference Board of Canada
10/01
Inflation Risk Rising in Late 2002
We reached full employment in 2001. But given the employment losses in recent months we are
now running under potential! As we bounce back, especially in 2003+, domestically induced inflation risk will rise. The currency will rise if
interest rate spreads have to be widened to reduce inflation concerns.
The Conference Board of CanadaThe Conference Board of Canada
10/01
Interest Rates (90-Day T-Bill) Quarterly 1991–02
Sources: Economy.com; CBoC; Statistics Canada.
U.S.
Canada
2
3
4
5
6
7
8
9
10
91 92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Consumer Price InflationCanada 1992–01
Sources: The Conference Board of Canada; Statistics Canada.
Target for Core Inflation is 1 to 3 per cent
0.0
0.5
1.0
1.5
2.0
2.5
3.0
92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Purchasing Power Parity
Exchange Rate 1992–02U.S. cents per Canadian dollar
Sources: The Conference Board of Canada; Statistics Canada.
60
65
70
75
80
85
90
92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Real Export Growth—GoodsCanada 1991–02
Sources: The Conference Board of Canada; Statistics Canada.
-4
-2
0
2
4
6
8
10
12
14
91 92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Real Government Spending on Goods and Services
Canada 1992–02
Sources: The Conference Board of Canada; Statistics Canada.
-2
-1
0
1
2
3
4
92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Gains in Total Employment (000s)Canada January 1998 – August 2001
Sources: The Conference Board of Canada; Statistics Canada.
-30-20-10010203040506070
1998Jan
Apr Jly Oct 1999Jan
Apr Jul Oct Jan2000
Apr Jul Oct Jan-01
Apr Jul
The Conference Board of CanadaThe Conference Board of Canada
10/01
Unemployment Rate 1992–02
Sources: The Conference Board of Canada; Statistics Canada.
NAIRU
5
6
7
8
9
10
11
12
92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Consumers’ Income Prospects
2001/02 PIT collections actually decline— “2001 is one of those rare moments in history where a huge dose of fiscal stimulus is actually
occurring at the exact point that it is most needed.” Also, real wages and salaries are
rising. Public sector pay administration takes a turn to “normal”.
The Conference Board of CanadaThe Conference Board of Canada
10/01
Provincial PIT Cuts, 2001 Budgets
NF 30.0 30.0 25.0 0.6PEI 10.2 14.3 14.3 1.1NS - - - -NB 20.0 25.5 8.5 0.3QC 1,000.0 1,133.0 1,167.0 1.4ON 1,782.5 955.0 1,035.0 0.8MB 49.5 97.0 41.0 0.5SK 145.9 170.9 46.7 1.0AB 181.0 864.0 - 0.7BC 50.0 1,350.0 1,500.0 3.4Total $3,269.1 $4,639.7 $3,837.5
2000 2001 2002 Cum./GDP’02
The Conference Board of CanadaThe Conference Board of Canada
10/01Federal PIT Cuts (% of GDP) November 2000 Mini-Budget
NF 42.0 90.0 1.0PEI 12.0 27.0 1.2NS 67.0 147.0 0.9NB 88.0 192.0 1.4QC 764.0 1680.0 1.1ON 1476.0 3251.0 1.1MB 117.0 256.0 1.1SK 100.0 218.0 0.9AB 377.0 831.0 0.9BC 447.0 986.0 1.1Total $3,490.0 $7,678.0
2000 2001 Cum./GDP’01
The Conference Board of CanadaThe Conference Board of Canada
10/01
Real Disposable Income GrowthCanada 1992–02
Sources: The Conference Board of Canada; Statistics Canada.
-1
0
1
2
3
4
5
92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01Index of Consumer Attitudes Canada
1988:1–2001:3 S.A.(1991=100)
Source: The Conference Board of Canada.
80
90
100
110
120
130
140
88 89 90 91 92 93 94 95 96 97 98 99 00 01
The Conference Board of CanadaThe Conference Board of Canada
10/01
Real Consumption Spending Canada 1991–02
Sources: The Conference Board of Canada; Statistics Canada.
-2
-1
0
1
2
3
4
5
91 92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Index of Business Confidence 1985:1 to 2001:3 SA (1991=100)
Source: The Conference Board of Canada.
Preliminary Data N=80
60
80
100
120
140
160
180
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01
The Conference Board of CanadaThe Conference Board of Canada
10/01
Real Business Investment Growth (Canada 1991–02)
Sources: The Conference Board of Canada; Statistics Canada.
-10
-5
0
5
10
15
20
25
91 92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Real GDP Growth Rate Canada 1992–02
Sources: The Conference Board of Canada; Statistics Canada.
0
1
2
3
4
5
92 93 94 95 96 97 98 99 00 01 02
The Conference Board of CanadaThe Conference Board of Canada
10/01
Heading Into 2002 . . . Plan on the mood improving slowly
Consumer spending struggles to hold up Disposable income growth still good Business investment is improving a bit Government adds to economy
The Conference Board of CanadaThe Conference Board of Canada
10/01
Something to Think About in 2001-02 Slower US growth means little inflation risk in
short term even at “full employment” Short-term real interest rates are very low Modest employment gains in a tight “underlying”
labour market IT inventory and capacity still key risk elements
The Conference Board of CanadaThe Conference Board of Canada
10/01
Something to Think About in 2002
It’s Been a Very Tough Fall in 2001.
Business from U.S. customers, and in the hospitality industry and transportation industries
in Canada, has been very hard hit.
All the risk is on the downside at the moment related to military and security issues.