Forecasting New Orders for Redwood Lumber

This study compares an econometric method with seasonally adjusted trend, quarterly projection, leading moving average, and exponentially weighted moving average techniques for forecasting new orders for redwood lumber. The major approach was to construct an economic model. The econometric approach is the application of statistical theory in the estimation of economic relationships. Forecasts for the period of July 1964 to June 1965 were made. The average forecast errors for the period studied were: 1) Seasonally adjusted trend 8.2; 2) Quarterly projection 7.9; 3) Leading moving average 8.2; 4) Exponentially weighted average 9.2; and 5) Econometric 7.7. These results indicate that the simpler methods are as good as the econometric for the period studied, especially for small or medium-size companies. The econometric method is mainly useful for industry-wide studies.

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