Forecasting is, as we observed in last week's briefing, a
perilous business. To stand a chance of being right about the
future you need to understand where you are now.
So it makes sense to pay attention to what the latest data and
news are saying. Certainly economists and journalists pore over
every new piece of data looking for signs of where the economy is
heading.
The emergence of 24-hour financial markets and media has fuelled
this industry, creating an insatiable appetite for opinions and
news.
In an age of abundant, cheap communication there is a risk of
over-interpreting every piece of information and extrapolating
recent events into the future. Psychologists call it the recency
bias.
