US Finance & Insurance Industry: Growth & Government Policy Impact - Essay Sample

Introduction

The United States has the largest and most liquid finance and insurance industry in the world. The subsectors in the industry include banking, asset management, Venture capital, and private equity. The industry contributed about 7.4 percent ($ 1.5 trillion) of U.S. domestic product in 2018. The high growth rate is attributed to good leadership within the industry as well as favorable financial policies. This paper will, therefore, focus on government fiscal policy and issues related to both taxation and interest rates and their impacts on the current trends in the Finance and Insurance Industry.

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Size and Growth Rate Assessment

According to IBIS World latest updates, the market size of the Finance and Insurance industry in 2020 is $5.0 trillion. It represents an annual growth of 2.1 percent on average between 2015 and 2020. The growth rate of the Finance and insurance industry is expected to be 0.9 percent in 2020. When compared with other U.S. industries over the past five years, the market size of the Finance and Insurance industry increased faster than the entire economy. The growth rate is attributed to a recent rise in the level of consumer disposable income which also increases the need for consumers' long-term financial security. The consumers are therefore, likely to use the services provided by the Financial and insurance industry.

Key Indicator to Monitor and Its Importance as Well as the Impact to the Finance and Insurance Industry

In the finance and insurance industry, the important macroeconomic indicators include inflation, interest rates, as well as the consumer income levels. The inflation rate is the most significant macroeconomic Indicator because it influences both the level of consumers' disposable income and the interest rates on financial services. It must, therefore, be closely monitored by the finance and insurance industry. Inflation increases the prices of goods and services, and this leads to an increase in the rates at which financial and insurance services are offered to customers. Furthermore, during inflation, the purchasing power of customers is reduced because of less disposable income resulting from an increase in the prices of goods and services.

Inflation Rate-Recent Trends Within the Finance and Insurance Industry

The Federal Open Market body considered consumer price inflation as one of the measures of personal consumption expenditures. Over time, the measure of inflation in the United States of America has fallen due to the existence of different inflation trends within the financial and the insurance industry which in one way or the other determines the overall economy of the United States. The trends are primarily measured based on four dimensions. The dimensions include the survey-based trend inflation; Core CPI, Core PCE, the trend inflation model, which is also divided into both the Core CPI and Core PCE.

Conclusion

In summary, the paper considers the United States to be the largest and most liquid finance and insurance industry in the world with subsectors in the industry including the banking sector, the asset management, venture capital, and private equity. The paper has, however, dealt on matters government fiscal policy and issues related to both taxation and interest rates and their impacts on the current trends in the finance and insurance industry. A view of the size and growth rate assessment, the key indicators that monitor the finance and insurance industry, and the trends involved have been discussed as noted herein.