Balsiger strikes again in '97
Our first two-time winner Wayne Balsiger of PACCAR Inc. in Bellevue, Wash., expects an exciting competition in 1998. "With the uncertainty in Asia, the field will be wide open this year."
By Anne M Porter -- Purchasing, 3/26/1998
Wayne Balsiger, a senior purchasing analyst and systems manager at paccar Inc. in Bellevue, Wash., becomes the first two-time winner in the history of Purchasing's Crystal Ball economic forecast contest.Balsiger's win should shock no one. He has finished in the Top 50 for eight consecutive years. He took first place in 1995 and missed the top spot in 1996 by only three tenths of a point. He took fifth place in 1994 and second back in 1991.
Balsiger's accuracy might seem uncanny, but his methods suggest he is merely an excellent student of history. He uses electronic spreadsheets to conduct trend analysis for each of the major indicators. Early on, he creates a forecast range for each indicator. As more information and data becomes available, he "stair steps down," narrowing the range to a final number.
The past two years, he says, have been "pretty linear" as simple extrapolations have yielded relatively true numbers for at least nine of the twelve indicators required in the contest. Balsiger says he pays particular attention to the relationships among economic indicators. (For example, an X% rise in GDP is likely to yield a Y% increase in industrial production.) Another trick: He maintains records of all his forecasts--with comparisons to actual results--going back to '92. This, he says, allows him to refine his assumptions annually and to learn from past mistakes.
Balsiger routinely reads Business Week and consults the Merrill Lynch Weekly Economic and Financial Commentary. He also consults, on occasion: Economic Indicators (by the president's Council of Economic Advisors), Commerce Department's Survey of Current Business, the Wall Street Journal, the Sunday New York Times, and Ice Alert from Thinking Cap Solutions. Still, Balsiger says he is always careful to account for biases present in these sources. (For example, financial market analysts tend to be very bearish on inflation whereas government sources tend to be more bullish.)
A difficult year
Variance scores were unusually high in the 1997 contest. Balsiger won with an 11.7 point absolute variance. His closest competitor, Rod Poole of Cone Mills scored 13.1. By contrast, the winning score in 1996 was 2.9.
Purchasing's amateur forecasters ran into trouble--heck even the pros had difficulty--because the 1997 economy defied one of its most hallowed principles: that low inflation and low unemployment would not coexist. Complicating matters was the big "first-quarter surprise." On April 30, Commerce astonished most forecasters when it reported that first-quarter real GDP had grown at an annualized rate of 5.6%. Most pundits wrote this off, predicting a substantial downward revision once accurate trade numbers became available. But when better data came forth, Commerce revised the figure--not down--but up, first to 5.8% (May 30) and then to 5.9% (June 27).
This created a distinct advantage for contestants like Balsiger who held their entries until the last possible moment (June 30). Real GDP consensus for all contest entries was only 2.6%. But short of a complete cessation of economic growth in the latter three quarters of 1997, this outlook became impossible to meet after the first-quarter number was finalized at 5.9%. As Balsiger commented back in August [PUR: Aug. 14, '97; p 20], "Unless the economy falls apart, there is no way the figure will be lower than 3.5%." Prior to the first-quarter data release, the Blue Chip professional consensus for real GDP had been at 2.8%. Following the advance release, the figure rose to 3.3%. After the final report, the figure went to 3.5%.
These difficulties notwithstanding, important wild cards were (as always): imports, exports, and business investment. Without these three indicators, Purchasing would, no doubt, be paying out a great deal of prize money for unresolvable ties. Trade data are notoriously difficult to predict because of their vulnerability to global financial and economic fluctuations. Meantime, business investment is tough because it can turn on a dime--witness the unexpected dive in fourth-quarter '97 business investment after the Asian crisis zapped the U.S. stock market back to reality. Sixty-four percent of an average 1997 contestant's total variation is attributed to misforecasts on these three indicators. Nearly three quarters of Balsiger's variation (8.7 of 11.7 points) reflects errors in predicting trade and business spending.
Stalking the win
Balsiger certainly seems to possess a winning formula for rendering forecasts, but he can't afford to rest on his laurels. Indeed, there are plenty of regular contestants stalking a win. Karen Kaplan ('93 winner) took eighth place this year after four straight appearances in the Top 5. Case's Mark Miller took 18th place, maintaining his perfect record for placing in the Top 50 since Purchasing commenced with the contest. Our 1995 winner, Allan Mann of Mann Steel, battled back into Top 20 territory this year. And Frank Ruane--who played it real humble when he won in 1996--has turned up in the Top 10 for three years running.
Entrants making their third consecutive Top 50 appearance (1995-1997) include: Tony Kuchera and Hank Mate of Case, Rod Poole of Cone Mills, Tom McElroy of Macsteel, and Bruce Robinson of Fuji Photo Film. Contestants going two for three among the Top 50 ('97 plus either '95 or '96) include Glen Parker of Central Louisiana Electric, Richard Neidhardt of Newly Weds Foods, Dale Stickel of Haarmann & Reimer, Stathis Katsaros of Datascope, Aubrey Harper of Carrier, Michael Adam of General American Door, Gregory Modlinski of Case, and Larry Ackerman of Sundstrand Aerospace. Notable narrow misses on the 1995-1997 three-for-three list include: J. Brian Bidwell of Mason & Hanger (55th rank this year), James Bollnow of Wyckoff Chemical (61st rank), and Joseph D'Amico of Superior Industries (69th rank).
For Balsiger, the competition may reside much closer to home as paccar colleague Jason Tininenko debuts in the Top 50 this year with a very respectable fourth-place finish.
Why everyone should enter this contest
Contest newcomers might feel a bit daunted by such a strong field of contestants. But even Balsiger thinks 1998 could be anyone's game. "With the uncertainty in Asia," he says, "the field will be wide open this year." What is more, the Internet has made economic data more readily available to potential prognosticators. Here is where all of the important data releases can be found:
* Bureau of Labor Statistics (www.bls.gov): Look under "Data," "News releases," to find monthly releases for the PPI, CPI, and unemployment.
* Bureau of Economic Analysis (www.bea.doc.gov): Look under "Overview of the U.S. economy," "BEA news releases," for quarterly GDP news releases covering real GDP, GDP chain price index, consumer spending, business investment (nonresidential gross private domestic fixed investment), imports, and exports.
* Federal Reserve Board (www. bog.frb.fed.us): Look under "Domestic & International Research," "Statistics: Releases & historical data," for data on interest rates, industrial production, and capacity utilization.
For data release dates and daily economic news links, visit the Cahners Economics web site (www.frontiernet.net/~cahners/).
Official entry coupon for the 1998 Crystal Ball forecast contest appears on page 21 of this issue. To learn your rank in the 1997 Crystal Ball Contest, fax request to Anne Millen Porter at 617.558.4327 or e-mail amp.purchasing@cahners.com.
The Top fifty forecasters
Rank Name Company Score
1 Wayne Balsiger PACCAR 11.7
2 Rod Poole Cone Mills 13.1
3* Tom McElroy Macsteel 15.6
3* Glen Parker Central Louisiana Electric 15.6
4 Jason Tininenko PACCAR 16.6
5 Frank Ruane Southstar Steel 17.2
6 Richard Neidhardt Newly Weds Foods 17.5
7 Dale Stickel Haarmann & Reimer 17.9
8 Karen Kaplan Jaakko Poyry 18.0
9 Richard Lindsey Rice Lake Weighing Systems 18.1
10 Daniel Pilling Zytec GMBH 18.2
11 Nathan Meerbaum Simkar Lighting 18.2
12 Tony Kuchera Case 18.2
13 Jerry Samu Wilsonart International 18.4
14 Paul Hsu State of the Art 18.6
15 Bruce Robinson Fuji Photo Film 18.8
16 Allan Mann Mann Steel 18.9
17 Hank Mate Case 19.1
18 Mark Miller Case 19.2
19 Stathis Katsaros Datascope 19.4
20 Frank Queeno F.N. Burt Company 19.5
21 Aubrey Harper Carrier 19.6
22 Michael Adam General American Door 19.6
23 Louis Moss Master Woodcraft 19.7
24 Lewis Faulkner Suburban Industrial Packaging 19.9
25 Justin Randall Nutex 19.9
Rank Name Company Score
26 Gregory Modlinski Case 20.0
27 Sam Edmondson Southwest Paper 20.1
28 Jack Gielow PPM 20.1
29 Herman King Carnival Cruise Lines 20.2
30 Jerry Rogers Long Automotive 20.2
31 Walter Hauser Fluidyne 20.2
32 George Gaspar Millenium Petrochemicals 20.3
33 Gary Chathan EMI Manufacturing U.S.A. 20.4
34 Craig Messerknecht DME 20.5
35 Kim Nguven Universal Molding 20.5
36 Rick Zuza Gibson Greetings 20.5
37 John Nobile Rich Products 20.5
38 Ronald Wilgocki Design Technology 20.6
39 Ronald Johnson Flow International 20.6
40 Robert Good Satec Systems 20.6
41 Marc Petroski Hercules Steel 20.6
42 Karen Stranahan Phonic Ear 20.6
43 Roger Pearly Johanna Foods 20.6
44 Dennis Fiedorowicz Patz Sales 20.7
45 Laura Hager Kelly Michener 20.7
46 Larry Ackerman Sundstrand Aerospace 20.7
47 Max Holt Ira D. Conklin & Sons 20.8
48 Duane Spidle Ampex 20.9
49 Larry Beyreis Johnson Truck Bodies 21.0
50 John DeRossi Atchison Casting 21.0
* Tie (same score, same postmark)
Values for 1997
Annual % chg.
Real GDP (Bil. '92$, SAAR) 3.8
GDP implicit price deflator (1992=100) 2.0
Consumer spending (Bil. '92$, SAAR) 3.3
Business investment (Bil. '92$, SAAR) 9.7
(nonres. structures+equipment)
Imports (Bil. '92$, SAAR) 13.9
Exports (Bil. '92$, SAAR) 12.5
Producer price index (1982=100) 0.3
(fin. goods less food and energy)
Consumer price index (1982-84=100) 2.3
(all urban consumers)
Total industrial production (1987=100) 5.0
Annual avg.
Mfg. capacity utilization (%) 81.7
Prime rate (monthly avg., %) 8.4
Civilian unemployment rate (%) 5.0
SOURCE: CAHNERS ECONOMICS DATABASE
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