Paper Example on Automotive Industry Economic Indicators

Introduction

A consultant is meant to provide expert information on a specific topic. Business consultants must be able to use the current economic data to predict what is likely to happen in future. The CEO will rely on my projections to formulate critical decisions that have far-reaching consequences. Managing an automobile manufacturer calls for a clear formulation of policies and a complete understanding of the consumer landscape. This paper will consider how certain macroeconomic indicators will affect the business of a car manufacturer, and what the CEO ought to do regarding sustainability.

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Economic Indicators

GDP

The dollar value of all the goods and services produced by a country over a specified period (Koba, 2011). Everything that the economy generated, including salaries and wages of workers, constitutes the final GDP figure. Specifically, the real GDP is the most important figure for investors and consumers since it considers inflation, and thus gives an accurate representation of the current state of the economy (Islam et al., 2016). An increase in product prices will not be indicated in the nominal GDP figures, and hence managers cannot use the information to make informed decisions.

A healthy economy is characterized by increasing wage and low unemployment as businesses are in need of labor to fill various positions. If the GDP is growing too fast, however, the Federal Reserve may intervene by raising interest rates to curb inflation (Koba, 2011). Such a move would make it expensive to acquire loans to buy houses and cars. Businesses would also find it costly to procure loans for expanding their operations. A falling GDP, on the other hand, creates the fear of an economic recession. It may lead to unemployment as businesses lay off workers in anticipation of the tough times. The economy is characterized by reduced consumer spending and business revenues. Car manufacturers must consider the GDP trend before making significant investments. The CEO should invest when the GDP is growing at a constant rate since there is money in the economy, and people are not afraid of spending.

Unemployment Rate

The percentage of the labor force that remains jobless in a country. Unemployed people are those that are able and willing to work but cannot secure any jobs despite searching actively in the last four-week period ("Unemployment Rate," 2018). High levels of unemployment leave people disgruntled, and they finally drop out of the labor market as they stop searching for work. The unemployment rate falls with no improvements realized in the labor market.

Unemployment is one of the key macroeconomic indicators used to assess the health of a nation's economy. The employment situation is a vital determinant of the vehicle sales in a country. The primary reason is that the unemployment rate will affect the spending power of the consumers thus reducing the market for cars considerably. The reduced amount of disposable income in the economy means that many people will not have the means to spend large amounts on a new vehicle. Laid off or jobless individuals will cut back on any unnecessary spending as a precautionary move due to the reduced disposable income (Hudson, 2013). There will be a very low demand for new cars since they are a luxury asset. I will advise the CEO to invest only when the unemployment level is low since there is more disposable income in circulation.

Conclusion

Macroeconomic indicators are critical considerations for any investor since they give an idea of how the business will perform. The CEO must consider these two vital measures before deciding whether to sink money into the market. GDP and unemployment affect the spending power of the customers (Islam et al., 2016).

References

Hudson, P. (2013). How Unemployment Rates Affect The Economy. Elite Daily. Retrieved 9 March 2018, from https://www.elitedaily.com/news/business/how-unemployment-rates-affect-the-economy
Islam, R., Ghani, A., Kusuma, B., & Wong, E. (2016). An Analysis of Factors that Affecting the Number of Car Sales in Malaysia. International Review Of Management And Marketing, 6(4), 875. Retrieved from HYPERLINK "https://econjournals.com/index.php/irmm/article/viewFile/2726/pdf"

Koba, M. (2011). Gross Domestic Product: CNBC Explains. CNBC. Retrieved 9 March 2018, from https://www.cnbc.com/id/44505017
Unemployment Rate. (2018). OECD. Retrieved 9 March 2018, from https://data.oecd.org/unemp/unemployment-rate.htm