The Forecasting business change involves more than analysis of the statistical data- it also embodies the prediction of  the economic change like  secular trend, cyclic variations, seasonal variations and a consideration of cause and effect.

Broadly speaking, the forecasting of the business fluctuations consists of the following steps as shown:

1. Understanding why the changes in the past have occurred. One of the main basic principles of statistical forecasting - indeed of all forecasting when historical data are available - is that the forecaster should use the data on the past performance to get a "speedometer reading" of the current rate (lets say, of sales) and of how fast this rate is increasing or decreasing. The current rate and the changes in the rate - "acceleration &  deceleration" - constitute the basic of forecasting. Once they are known to various mathematical techniques can develop projections from them. If an attempt is made to forecast the business develops projections from them. If an attempt is made to forecast the business fluctuations without understanding why the past changes have taken place, the fluctuations without understanding why past changes have taken place, the forecast will be purely mechanical based solely upon the application of mathematical formula and subject to serious error.

The Observation and analysis of the past behavior is one of the most vital parts of forecasting. However, it must  be carefully noted that though future may be some sort of extension of the past. It might  not be an exact replica. The Changes in the business and economic activity are caused by numerous forces or factors which are often difficult to discover and measure. Not only this, they may appear in all types  of combinations and may be constantly changing. Hence in making forecasts, we should believe that there are certain regularities in the past behavior that  can be observed and used as a basis for reducing the uncertainties of the future. It is often said that the past, imperfect indicator of the future though it is, the best guide we have in attempting to make the predictions.

2. Determining which phases of business activity should  be measured. After this  is known why business fluctuations have occurred, or if there is a reasonable supposition, it is necessary to measure certain phases of business activity in order to predict what changes will probably follow the present level of the activity.

3. Selecting and compiling a data to be used as a measuring devices. There is an inter dependent relationship between the selection of statistical data and determination of why business fluctuations occur. The Statistical data cannot be collected and analyzed in an intelligent manner unless there is a sufficient understanding of business fluctuations: likewise it is important that the reason for business fluctuations be stated in such a manner that it is possible to secure data that are related to the reasons.

4. Analyzing the data: In this last step, the data are analyzed in the light of one's understanding of the reason why change in a given  statistical part of the problem to draw conclusions on the future course of action. The techniques of drawing conclusions may be known as  forecasting techniques and they represent anyone of a large number of analytical devices for summarizing data and drawing inferences from the summaries.