Forecasting Business Investment in the Short Term Using Survey Data

In this paper, forecasting models for Swedish business investment growth which make use of data from Sweden’s most important business survey – the Economic Tendency Survey – are evaluated. An out-of-sample forecast exercise using nine years of quarterly real-time data is conducted. The results suggest that the survey data have informational value that can be used to improve forecasts. Perhaps not surprisingly, the time series with the highest predictive power for business investment growth tend to be based on data for the investment goods industry. Forecasts based on a simple arithmetic mean of individual model forecasts do well in the evaluation and should accordingly be useful when forecasting Swedish business investment in practice.