The U.S. Census Bureau publishes data on factory orders for all manufacturing, durable goods, and nondurable goods industries. Shown here are factory orders in the United States from 1987 through 1999 ($ billion).
(a) Use these data to develop forecasts for the years 1992 through 1999 using a 5-year moving average.
(b) Use these data to develop forecasts for the years 1992 through 1999 using a 5-year weighted moving average. Weight the most recent year by 6, the previous year by 4, the year before that by 2, and the other years by 1.
(c) Which method is more suitable for forecasting factory orders? Hint: Compare the two methods based on Mean Absolute Deviation (MAD)?
Year Factory Orders ($ billion)
1987 2,512.7
1988 2,739.2
1989 2,874.9
1990 2,934.1
1991 2,865.7
1992 2,978.5
1993 3,092.4
1994 3,356.8
1995 3,607.6
1996 3,749.3
1997 3,952.0
1998 3,949.0
1999 4,137.0