Forecasting Analysis: What It Is & How Does It Work

Forecasting Analysis: What It Is & How Does It Work


SPSS forecasting is a time series feature of the tool providing SPSS help with predicting future events. Forecasting is used across various fields of our lives because of our curiosity to know about future events. It uses past and present data to predict upcoming occurrences. Researchers use this analysis method to predict the outcomes and forecast future data using past data outputs. When researchers expect that some of the past numeric data will occur in future as well or some of their patterns will occur, they use forecasting analysis to forecast them. We are composing this blog post to make you aware of what forecasting analysis is, how it works, why it is important and much more. Let’s move forward with the blog.

What is forecasting?

Forecasting is a kind of process majorly used by businesses and researchers to predict future trends using historical data as inputs. Predictions and assumptions made here help businesses determine their budget and expenses for the upcoming time period, similarly it helps researchers to make decisions for their future data outputs.

    1. Primary sources: The information collected through research questionnaires, survey groups, interviews, and any other direct means of gathering information is referred to as information from primary sources. Since it is first-hand information, gathered directly from a person or organisation, it is considered to be trustworthy.
    2. Secondary sources: Information collected through already published and processed articles, journals, and other third-party sources is considered to as information from secondary sources. Since secondary data sources provide the information in an organised and compiled manner, hence it makes the forecasting process more rapid.

Importance of forecasting analysis

Predicting forthcoming occurrences and trends accurately is beneficial in several contexts for business management and researchers. Because of its predicting attribute, forecasting analysis is significant in various aspects such as:

    1. Estimating how successful a new business venture will be.
    2. Estimating a company’s future financial requirements.
    3. Predicting future earnings and spending of a company.
    4. Helping managers and researchers make the right decisions.
    5. Developing effective future improvement plans.
    6. Discovering potential shortcomings ahead of time.

How does forecasting analysis work?

Before forecasting researcher or business management has to find the answers to the following questions:

    1. What is the goal of the forecast?

      Identifying the goal helps you determine the level of precision and most appropriate forecasting method. All of the broad decisions can be made easier if you are aware of your forecasting goal because you will have the correct approach in your hand.

    2. What are the main components and variables you are going to use?

      The different systems elements that have to be forecasted need to be reviewed and their relative values analysed before a forecast is made. Depending on the desired forecast, you can imply an in-depth SPSS data analysis for any relevant elements to be studied.

    3. How important past events and values are?

      Changing conditions from the period when the data was gathered can diminish the relevance of the forecast. The implementation of new research strategies has the ability to make past data contemporary and relevant.

Techniques of forecasting

    1. Qualitative methods

      It is beneficial when you have to develop forecasts with limited scope and in short terms. Interviews, market research, polls, and surveys are examples of qualitative forecasting techniques. But collecting data for qualitative forecasting can be difficult sometimes.

    2. Time series forecasting method

      This type of forecasting analyses past data and how variables interacted with each other in the past. By extrapolating these statistical relationships into the future, forecasts can be generated along with confidence intervals to determine how likely it is that the actual outcomes will meet or exceed those expectations.

    3. Econometric Inference

      In addition to cross-sectional data, cross-sectional data can be utilised to identify links between variables -- although identifying causation can be difficult and can sometimes lead to false conclusions. This is an econometric analysis which usually uses regression models. One can make stronger causal claims by using methods such as instrumental variables, when available.

How to choose the right forecasting method?

Choosing the correct forecasting technique depends on the type and scope of the forecast. Qualitative analysis techniques can be time-consuming and expensive but always provide accurate forecasts. On the other hand, quantitative methods are more beneficial in terms of quicker analysis and containing larger scope.
As a result, forecasters often perform a sort of cost-benefit analysis in order to determine which method optimises the chances of an accurate forecast in the most efficient manner. Furthermore, combining techniques can improve the reliability of forecasts by taking advantage of their synergistic effects.

Limitations of forecasting

The greatest limitation of forecasting analysis is its quality itself, that is, predicting the future which is fundamentally unknown today. Hence it totally works on best guesses. Though we can improve the reliability of the forecasts by various methods, the data which has to be inputted into the model needs to be corrected. Not doing so, will result in a garbage-in, garbage-out type of analysis.

forecasting techniques


Forecasting analysis helps researchers, analysts, investors, and managers make well-thought decisions for future events. Many researchers and businesses can’t grow without good forecasts. Using qualitative and quantitative forecasting analysis methods, users can get better insights into what lies ahead in time. In any case, since we cannot definitively predict the future, and since forecasts are often based on historical data, their accuracy will always come with some margin for error and may even be incorrect in some cases. Get expert assistance if needed. Good luck!

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