Communication Strategies for Economic Forecasts and Policy Simulations : Communication Strategies for Economic Forecasts and Policy Simulations Economic Modelling and Forecasting Project in Ukraine October, 2001


An Appropriate Communications Strategy is Key For Success: 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 Guiding Principles: The Guiding Principles Understand the Audience Define your Message Understand the Forecasting Tool Know the Material


Applications of Macroeconomic Models: Applications of Macroeconomic Models Baseline Economic Outlooks Alternative Scenarios Shock-Minus-Control Analysis Policy Simulations


Economic Outlooks: Economic Outlooks Understand the Audience Define the Message Understand the Forecasting Tool Know the Material


Economic OutlooksUnderstand the Audience: Economic Outlooks Understand 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


Economic OutlooksGovernment Sector: Typical Audiences: Economic Outlooks Government Sector: Typical Audiences Internal Senior Management Peers in Other Departments Private Sector Senior Management Private Sector Analysts Media The Public


Economic OutlooksPrivate Sector: Typical Audiences: Economic Outlooks Private Sector: Typical Audiences Internal Senior Management Customers: Senior Management Customers: Analysts Media


Economic OutlooksUnderstand the Audience: Economic Outlooks Understand 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


Economic OutlooksDefine the Message: Economic Outlooks Define 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


Economic OutlooksUnderstand the Tool (I): Economic Outlooks Understand 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.


Economic OutlooksUnderstand the Tool(II): Economic Outlooks Understand 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).


Economic OutlooksUnderstand the Tool(III): Economic Outlooks Understand 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.


Economic OutlooksUnderstand the Tool(IV): Economic Outlooks Understand 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


Economic OutlooksKnow the Material: Economic Outlooks Know 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


Economic OutlooksTypical Communication Structure: Economic Outlooks Typical Communication Structure I. Highlights II. Key Messages III. Exogenous Assumptions - discussed -defended IV. Causal Links to Key Outcomes V. Risks VI. Conclusion that repeats key messages


Economic OutlooksGovernment Sector: Typical Audience Senior Management: Economic Outlooks Government Sector: Typical Audience Senior Management Characteristics: No time Sensitive to political implications of outlook Risk Sensitive Low level of technical expertise


Economic OutlooksGovernment Sector: Typical Audience Senior Management: Economic Outlooks Government Sector: Typical Audience Senior Management Needs: Economic outlook for budget planning Economic outlook for policy design Economic outlook for political “heads up”


Economic OutlooksGovernment Sector: Typical Audience Senior Management: Economic Outlooks Government 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


Economic OutlooksPrivate Sector: Typical Audience Customer Analysts: Economic Outlooks Private Sector: Typical Audience Customer Analysts Characteristics: Time is available Moderate Degree of Technical Expertise Skeptical regarding forecast accuracy Little interest in technical details


Economic OutlooksPrivate Sector: Typical Audience Customer Analysts: Economic Outlooks Private Sector: Typical Audience Customer Analysts Needs: 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


Economic OutlooksPrivate Sector: Typical Audience Customer Analysts: Economic Outlooks Private 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


Policy Simulations: Policy Simulations Understand the Audience Define the Message Understand the Tool Know the Material


Policy SimulationsDefine the Audience: Policy Simulations Define 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


Policy SimulationsGovernment Sector: Typical Audiences: Policy Simulations Government Sector: Typical Audiences Internal Senior Management Peers in Other Departments Often Confidential


Policy SimulationsPrivate Sector: Typical Audiences: Policy Simulations Private Sector: Typical Audiences Internal Senior Management Customers: Senior Management Customers: Analysts Media


Policy SimulationsDefine the Message: Policy Simulations Define 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


Policy SimulationsUnderstand the Tool (I): Policy Simulations Understand 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.


Policy SimulationsUnderstand the Tool(II): Policy Simulations Understand 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


Policy SimulationsUnderstand the Tool(III): Policy Simulations Understand 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


Policy SimulationsKnow the Material: Policy Simulations Know 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 Communications Strategy for Economic Outlooks at the Conference Board of Canada (I): The Communications Strategy for Economic Outlooks at the Conference Board of Canada (I) Audiences Customers: Senior Management Customers: Analysts Media


 Audience: Customers, Senior Management: Audience: Customers, Senior Management No time Risk Sensitive Low level of technical expertise Need outlooks to critique business plans received from staff


 Audience: Customers, Analysts: 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


 Audience: Media: 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 Communications Strategy for Economic Outlooks at the Conference Board of Canada (II): 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….


Slide37: Communication Vehicles (Chronological Order) Press Release Technical Forecasting Seminar Economic Outlook Conferences


Communication Vehicle: On-Line Forecast Data Delivery: 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


Communication Vehicle: Forecast Executive Summary Delivered On-Line: Communication Vehicle: Forecast Executive Summary Delivered On-Line Audiences: a) More sophisticated analysts in government and working for large corporations b) Senior Management with on-line expertise Need fulfilled: timely access to summary description of the outlook


Communication Vehicle: Forecast Executive Summary Mailed: Communication Vehicle: Forecast Executive Summary Mailed Audiences: a) Analysts in government and working for large corporations b) Senior Management Need fulfilled: summary description of the outlook


Communication Vehicle: Outlook Publication Mailed: 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


Communication Vehicle: Press Release: Communication Vehicle: Press Release Audience: Media Need fulfilled: ability to provide important information to their customers


Communication Vehicle: Economic Outlook Seminars and Conferences: Communication Vehicle: Economic Outlook Seminars and Conferences Audiences: Senior Management; Analysts; Media Need fulfilled: ability to interact personally with senior Conference Board Staff


Communication Resources at the Conference Board of Canada: Communication Resources at the Conference Board of Canada Forecast Specialists On-line support staff Editors Layout designers Mailroom Spokespersons Media Relations Conference Support Staff


Communication Training at the Conference Board of Canada: Communication Training at the Conference Board of Canada Writing Skills Presentation Skills Media Training


An Example of an Outlook Presentation: 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


Key Messages: 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


Tragedy,Confidence & The FuturePlanning for a Very Uncertain 2002: Tragedy,Confidence & The Future Planning for a Very Uncertain 2002 CS Co-Op and CS Alterna Bank Strategic Planning Retreat September 29, 2001 Paul M. Darby Director, Economic Forecasting


What We Will Talk About: 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


Prospects Outside Canada 2002: 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


Some Basic Facts About September 11, 2001 Terrorist Attack: 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


United States: Real GDP Growth(annual per cent change): United States: Real GDP Growth (annual per cent change) Sources: Regional Financial Associates; The Conference Board of Canada.


U.S. Consumer Confidence(1985=100): U.S. Consumer Confidence (1985=100) Source: The Conference Board Inc.


Canada’s Outlook 2002 Highlights: 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


What is A “Full-Blown” Recession?Quarterly GDP Growth Rates—Canada 1989-1993: What is A “Full-Blown” Recession? Quarterly GDP Growth Rates—Canada 1989-1993 Source: The Conference Board Inc.


What’s in Our Current Outlook?Quarterly Growth Canada 1999–2002: What’s in Our Current Outlook? Quarterly Growth Canada 1999–2002 Sources: The Conference Board of Canada; Statistics Canada.


Inflation Risk Rising in Late 2002: 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.


Interest Rates (90-Day T-Bill) Quarterly 1991–02: Interest Rates (90-Day T-Bill) Quarterly 1991–02 Sources: Economy.com; CBoC; Statistics Canada. U.S. Canada


Consumer Price InflationCanada 1992–01: Consumer Price Inflation Canada 1992–01 Sources: The Conference Board of Canada; Statistics Canada. Target for Core Inflation is 1 to 3 per cent


Exchange Rate 1992–02U.S. cents per Canadian dollar: Purchasing Power Parity Exchange Rate 1992–02 U.S. cents per Canadian dollar Sources: The Conference Board of Canada; Statistics Canada.


Real Export Growth—GoodsCanada 1991–02: Real Export Growth—Goods Canada 1991–02 Sources: The Conference Board of Canada; Statistics Canada.


Real Government Spending on Goods and Services Canada 1992–02: Real Government Spending on Goods and Services Canada 1992–02 Sources: The Conference Board of Canada; Statistics Canada.


Gains in Total Employment (000s)Canada January 1998 – August 2001: Gains in Total Employment (000s) Canada January 1998 – August 2001 Sources: The Conference Board of Canada; Statistics Canada.


Unemployment Rate 1992–02: Unemployment Rate 1992–02 Sources: The Conference Board of Canada; Statistics Canada. NAIRU


Consumers’ Income Prospects: 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”.


Provincial PIT Cuts, 2001 Budgets: Provincial PIT Cuts, 2001 Budgets NF 30.0 30.0 25.0 0.6 PEI 10.2 14.3 14.3 1.1 NS - - - - NB 20.0 25.5 8.5 0.3 QC 1,000.0 1,133.0 1,167.0 1.4 ON 1,782.5 955.0 1,035.0 0.8 MB 49.5 97.0 41.0 0.5 SK 145.9 170.9 46.7 1.0 AB 181.0 864.0 - 0.7 BC 50.0 1,350.0 1,500.0 3.4 Total $3,269.1 $4,639.7 $3,837.5 2000 2001 2002 Cum./GDP’02


Federal PIT Cuts (% of GDP) November 2000 Mini-Budget: Federal PIT Cuts (% of GDP) November 2000 Mini-Budget NF 42.0 90.0 1.0 PEI 12.0 27.0 1.2 NS 67.0 147.0 0.9 NB 88.0 192.0 1.4 QC 764.0 1680.0 1.1 ON 1476.0 3251.0 1.1 MB 117.0 256.0 1.1 SK 100.0 218.0 0.9 AB 377.0 831.0 0.9 BC 447.0 986.0 1.1 Total $3,490.0 $7,678.0 2000 2001 Cum./GDP’01


Real Disposable Income GrowthCanada 1992–02: Real Disposable Income Growth Canada 1992–02 Sources: The Conference Board of Canada; Statistics Canada.


Index of Consumer Attitudes Canada 1988:1–2001:3 S.A.(1991=100): Index of Consumer Attitudes Canada 1988:1–2001:3 S.A.(1991=100) Source: The Conference Board of Canada.


Real Consumption Spending Canada 1991–02: Real Consumption Spending Canada 1991–02 Sources: The Conference Board of Canada; Statistics Canada.


Index of Business Confidence 1985:1 to 2001:3 SA (1991=100): Index of Business Confidence 1985:1 to 2001:3 SA (1991=100) Source: The Conference Board of Canada. Preliminary Data N=80


Real Business Investment Growth (Canada 1991–02): Real Business Investment Growth (Canada 1991–02) Sources: The Conference Board of Canada; Statistics Canada.


Real GDP Growth Rate Canada 1992–02: Real GDP Growth Rate Canada 1992–02 Sources: The Conference Board of Canada; Statistics Canada.


Heading Into 2002 . . . Plan on the mood improving slowly: 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


Something to Think About in 2001-02 : 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


Something to Think About in 2002: 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.


Slide77: www.conferenceboard.ca


To Conclude… : To Conclude… Understand the Audience Define your Message Understand the Forecasting Tool Know the Material