Relative Size and Growth Rate of Construction Industry Paper Example

Introduction

A gross domestic product is a standard metric that is used to measure the size of a countries economy. In the modern day, nations specialize in increasing the welfare of their savings. Therefore, they formulate economic policies, which are essential in guiding the pattern of economic activities. There are two major types of financial systems: fiscal policy and monetary policy. Budgetary policies executed by the federal government. The tools of budgetary policymakers mainly two: taxation and government expenditure. In economic growth, fiscal politicians usually conduct their operations in consultation with monetary policymakers.

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It is vital for the two facets of the policy process to consult each other, to avoid the detrimental effects of the policies. The devastating impact may emanate from poorly made systems. The other type of system is the monetary policy. The FED is in charge of the formulation and implementation of monetary policy. Monetary policy orients at regulating money supply in the economy. This paper aims at analyzing various macroeconomic indicators in breadth and depth, to gain valuable insights on how their trends have been impacting the construction industry.

Newsworthy Macroeconomic Indicator/Policy

Economic Policies are used to monitor and control macroeconomic indicators. Macroeconomic indicators include but are not limited to, employment levels, inflation rate, Balance of trade, exchange rates, and price stability. They signify the health of the economy, concerning economic growth rates and prowess. Policy balance is essential in controlling the values of macroeconomic indicators, to make sure that, the dynamics surrounding the signs mean good for the economy. The primary objective is to get an incremental effect in the economic growth rates of the US. In the US, there are various industries, whose share in GDP is very significant. Industry growth rates are monitored to make sure that economic policies undertaken are entirely an incentive to the growth of industries (Kibritcioglu, 2018). The strategies mentioned above affect the industries in the US economy, via their impact on macroeconomic indicators.

Importance of Macroeconomic Indicator/ Policy

From an economic perspective, the growth of industries, as well as the economy, relies on the ability of investors to predict the movement of primary macroeconomic variables accurately, and the inflation level is not an exception. Therefore, price fluctuations are seen to be working against the construction industry, and to the extreme, they made the trade to register declining share in the GDP up to the year 2010. By relatively comparing the other period, it is visible that, from 2011, henceforth, the construction industry gained momentum. From 2011, the share of the construction industry in GDP is increasing.

Recent Trend in the Microeconomics Indicator Policy

The US industry data, specifically for the construction industry, depicts that there was a declining share of the construction industry in the national GDP. The construction industry registered the lowest percentage in 2010, whereby the share in GDP was 1008.3. As from 2011, the growth of construction industry then started ballooning, and hence from the data, an upward trend occurred afterward. The downward trend of the increase in economic growth from 2007 to 2010, from the economic point of view, is attributable to the vast world economic depression of 2008, which eroded the rise in the US economy. It was a second major economic depression to occur, after the great economic recession of 1930 that led to the emergence of the great economist John Maynard Keynes. Macroeconomic indicators responded to this dynamics, and hence this paper is interested in assessing their influence on the construction industry growth (Rittenberg, 2018).

The graph in the US inflation rates reflects that between the year, 2008 and 2010, the percentage change in the US. General Price level or the consumer price index faced a considerable fluctuation, this drastic changes in the price index created a state of uncertainty in the entire nation. These developments likely affected interest rates and exchange rates negatively, a case which further scared investors. When investors are afraid of, they will not undertake massive investments.

In 2011, it was 1008.6 a slight increase from the previous 2010 amount of 1008.3. The increase is substantially attributable to the price stability which was achieved in those years. From the graph on inflation, we find that the percentage change of the consumer price index was minimum. The low fluctuations are seen to have impacted the growth of the construction industry positively. It occurred through improving the investor confidence and certainty. Consequently, it was triggered by a more stable price, and low fluctuations, to invest more.

The reviewed Graph data for the unemployment rate in the US revealed that the percentage increased from 2008 to 2010 and after that, it declined. From the developments discussed earlier, the price fluctuations spanning from 2008 to 2010 decreased investments. More industries collapsed, and the few who survived registered declining growth rates. The declining growth rate of the construction industry depicted by its declining share in the GDP in that particular period. The industrial world acts as an important element of economic growth, because it constitutes the demand side, for the labor markets (Rittenberg, 2018). In situations of high unemployment levels, the nation's capacity appears to be underutilized levels (Ramey, V. A., 2018). Therefore, there will be a stagnating growth in industries, a scenario which will not change until we put resources to maximum utilization. It might have sparked the low declined growth of the construction industry. In another dimension, the 2008 US Financial crisis rendered several people jobless, hence reduced industrial production.

Recent trends

In conclusion, the US regime focuses on policies to stabilize the economy and expects price index fluctuations to be minimal and unemployment level to be shallow. In the face of those policies, construction industry growth will be high.

References

Ramey, V. A., & Zubairy, S. (2018). Government spending multipliers in good times and wrong: evidence from US historical data. Journal of Political Economy, 126(2), 850-901.

Selcuk, F., Rittenberg, L., & Kibritcioglu, A. (2018). Long Memory in Turkish Inflation Rates. In Inflation and Disinflation in Turkey (pp. 103-128). Routledge.