“Dynamic factor model”: that’s the name of the model developed at the end of 2004 by the General Directorate for Economic and Financial affairs of the European Commission to forecast the trend of the Gross Domestic Product (GDP) of the Euro zone. The latest version of the model forecasts a GDP growth in the Euro zone for the first quarter of 2006 comprised between 0.4% and 0.8%; for the second quarter a growth rate of between 0.3% and 0.8% is predicted, while for the period September-December 2006 the growth forecast fluctuates between 0.2% and 0.8%. All the estimates are slightly lower than those published by the General Directorate at the end of March. The model – which boasts of a rate of reliability among operators of 68% – has a declared margin of error varying between 0.21% and 0.27%, and is based on a mix of common denominators of the production cycle in the Euro zone and on specific components of each country and/or each quarter taken into consideration.
