A new approach to GDP projections

Although released in August, this Parliamentary Budget Office analysis examines the likelihood of government estimates of both GDP growth and deficit projections by using a "fan chart".  Instead of a simple line projecting GDP growth, an ever growing cone or fan is created with probabilities.  The much larger 90% fan means that in 90% of cases, GDP growth will fall somewhere on the fan area.  The much narrower 50% fan means that in only half the cases GDP growth will fall in this range.  This is an interesting approach and improves upon simply averaging bankers' estimates which is generally what’s done(see here).  The PBO analysis also shows that government estimates of growth and deficit reduction may be somewhat optimistic based where they fall in the "fan".