Modern economic theory gives an important role to expectations as an influence on outcomes. This paper reviews evidence on how well measures of expectations conform to outcomes. It confirms earlier results that measures taken from financial markets perform poorly as predictors of outcomes. Looking at the individual responses to the Confederation of British Industry’s Industrial Trends Survey, it does find, however, that there are significant correlations between expected and realised outcomes of wages, prices, costs orders and employment. It also finds some evidence that actual prices reflect expected future prices, but with a coefficient much lower than economic theory predicts. There is evidence that forecast errors are explained by past forecasts, as well as revisions to the economic outlook, casting doubt on the idea that firms’ forecasts make the best use of the information available at the time. The paper concludes by observing that, while expectations are undoubtedly important, economists need to build on work looking at how they are derived instead of simply assuming they are rational.

For more than four decades, the New Zealand Institute of Economic Research (NZIER) has conducted a two-question, quarterly survey of architect forecasts of public and private sector construction expenditure. This qualitative survey is published one week after the end of each quarter and nine weeks ahead of the official quantitative data thereby giving architect opinion nowcasting status. This paper covers selected aspects of this unexplored series with particular reference to residential housing construction and the value-added information from architects as nowcasters. Specifically, we consider several qualitative-to-quantitative conversion methods, in-sample and out-of-sample performance, cyclical features and respondent dynamics. Although our work relates to architects — a sub-sector of the service industry — our results have a wider application to business survey questions using ordered qualitative responses.