What are the critical variables and relationships?
The performance of an economy reflects the interaction of many economic variables and underlying relationships. The main economic relationships examined may be summarised as follows: Domestic expenditure. Projections of private consumption typically take into account real disposable income, household wealth, changes in the rate of inflation, monetary and financial conditions, and leading indicators of consumer confidence and retail sales. Business fixed investment is mainly assessed in relation to non-financial indicators (sales, output and capacity utilisation) and financial variables (cash flow and interest rates). Business survey information is also taken into account. Projections for residential construction take account of demographic trends, housing stocks, real income and financial conditions, and also draw on cyclical indicators for the construction sector. Projections of stockbuilding are usually made with reference to relevant stock-output and stock-sales ratios. Employment,
