Professor Puttu Guru Prasad explains the barometric method of demand forecasting. The barometric method constructs an index of relevant economic indicators and uses movements in the index to forecast future trends. It uses leading, coincidental, and lagging indicators. Leading indicators precede business cycle turning points. Coincidental indicators move with the business cycle. Lagging indicators follow turning points. As an example, development of new housing plots leads to increased demand for construction materials and housing loans. However, barometric forecasting is only 80-90% accurate in predicting turning points.

1. BAROMETRIBAROMETRI
C METHODC METHOD
Professor & Lawyer. Puttu Guru Prasad,
M.Com. M.B.A., L.L.B., M.Phil, PGDFTM, APSET. ICFAI TMF, (PhD) at JNTUK,
Expert Resource person at APHRDI, Bapatla,
Senior Faculty for Management Studies,
Certified NSS Program Officer,
Coordinator – College Beautification
S&H Department, VVIT, Nambur,
93 94 96 98 98, 807 444 95 39,
My Blog: puttuguru.blogspot.in
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2. What isWhat is
BAROMETRICBAROMETRIC
METHOD ?METHOD ?
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3. Techniques of Demand Techniques of Demand
ForecastingForecasting
Trand
projection
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Baromatric
Method
Econometric
Method

4. BAROMETRIC METHODBAROMETRIC METHOD
The basic approach of barometer
technique is to construct an
index of relevant economic
indicators and to forecast future
trends on the basis of
movements in the index of
economic indicators.
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5. The indicators used in BarometricThe indicators used in Barometric
MethodMethod
• Leading indicatorsLeading indicators
• Coincidental indicatorsCoincidental indicators
• Lagging indicatorsLagging indicators
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6. Leading indicatorsLeading indicators
consists of indicators which move up and downconsists of indicators which move up and down
ahead of some other series.ahead of some other series.
E.gE.g. => (i) index of net business formation:. => (i) index of net business formation:
(ii) New building permits:(ii) New building permits:
(iii) New orders for durable goods:(iii) New orders for durable goods:
(iv) Corporate profit after tax, etc..(iv) Corporate profit after tax, etc.. 6

7. Coincidental indicatorsCoincidental indicators
The ones that move up and down
simultaneously with the level of economic
activity.
E.g.=> (i) number of employees in the non-
agricultural sector:
(ii) rate of unemployment:
(iii) sales recorded by the manufacturing, trading
and the retail sectors etc.
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8. Lagging indicators
Lagging indicators consists of those indicators
which follow a change after some time lag.
E.g. => (i) labour cost per unit of manufactured
output:
(ii) Out Standing loans:
(iii) lending rate for short-term loans etc.
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9. BUSINESS CYCLEBUSINESS CYCLE
Leading indicators precede(Lead) Business cycles’ TurningLeading indicators precede(Lead) Business cycles’ Turning
points (i.e., peaks and troughs), coincident indicatorspoints (i.e., peaks and troughs), coincident indicators
move in step with business cycle, while lagging indicatorsmove in step with business cycle, while lagging indicators
follow or lag turning points in business cycle.follow or lag turning points in business cycle.
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10. Barometric ExampleBarometric Example
Development and allotment of land by Delhi
Development Authority to
Group Housing Societies (a lead indicator)
indicates higher
demand prospects for cement, steel and other
construction material (coincidental indicators)
and increase in housing loan distribution
(lagging indicators).
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11. DISADVANTAGE
At best , Barometric forecasting is only 80 toAt best , Barometric forecasting is only 80 to
90 percent accurate in forecasting turning90 percent accurate in forecasting turning
point.point.
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12. THANK
YOU 12