Use of macroeconomic forecasts in corporate forecasting: A note on aggregation problems

The use of corporate sales forecasting models is simplified, if the forecasting models have such explanatory variables for which published macroeconomic forecasts are easily available. However, if the macroeconomic forecast is not accurate enough it may not be useful for forecasting the corporate level sales. In addition, aggregation problems arise in the use of this kind of model. There is, first, the traditional aggregation error when product subgroup forecasting models are aggregated to a total sales forecasting model. Secondly, when the product group composition of sales differs from the composition of consumer expenditure, there is a composition bias. This remains even when perfect aggregation is possible. Similar problems arise e.g. in region and industry forecasting. These effects should be judgmentally taken into account when using such models.