However, an assessment of the overall economic environment can look at some major indicators to see whether they are favourable or unfavourable. In this essay I will examine three: GDP growth, interest rates and inflation. A reason why the economic environment is now favourable for UK businesses is that economic growth as measured by GDP growth is positive. This line of analysis is based on the importance of economic growth to all major business sectors.
GDP measures the overall value of economic activity in an economy, including consumer spending, business investment and government spending. Economic growth is therefore an important indicator of how favourable overall economic conditions are. In recent years the UK economy has slowly recovered from the recession when GDP fell significantly that followed the global financial crisis in The recession was highly unfavourable for many UK businesses and it led to many reducing production capacity, cutting investment and losing jobs as strategies for survival.
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The subsequent improvement in GDP growth, whilst relatively slow, has proved sustainable and there has been a steady improvement in consumer and business confidence despite cuts in government spending. An example of a UK business that has benefited from favourable economic growth is Dominos UK who have significantly increase revenues and profits partly as a result of stronger consumer spending.
Dominos has used the confidence from rising consumer spending to accelerate its store opening programme, adding 60 new stores in Not every retailer performed so well in though, highlighting how performance can vary even in favourable conditions. Linking back to the essay question , it is obvious that a return to positive economic growth at this stage of the business cycle is good news for most UK businesses, though the overall impact of GDP growth is just one factor affecting business performance. Businesses that are struggling to compete for other reasons such as a cost disadvantage will not benefit so much from favourable GDP.
A reason why the economic environment is now favourable for UK businesses is that interest rates have remained very low for many years.
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The analysis for this point is based on the important role interest rates play in affecting economic activity of both businesses and consumers. The bank base rate helps determine the cost of borrowing for both businesses and households, and also influences the returns earned from saving.
Consumers benefit from low interest rates if they have variable rate mortgages as their disposable income each month is much higher and they can afford to spend more. Businesses benefit if they have high levels of debt as the finance costs are lower thereby resulting in lower interest costs and higher profits and cash flows. The evidence for the UK economy must inevitably focus on the consistently low level of interest rates since When interest rates were cut to 0. This 0. Stock prices have been falling after a year of record gains, indicating that the period of economic growth is either slowing or coming to an end.
This index will reflect growth for producers, whether they are making profits, and if new jobs are being created. After several years of steady increase, Industrial Production is down, hinting that aggregate demand may soon be too. Unemployment is another indicator of aggregate demand. If unemployment is low, many people have jobs, and they will probably be spending, adding to GDP. Unemployment has been at a record low, but recent layoffs in the auto industry as well as other have driven that number up to 4. This is still a low figure, but if it continues to rise, that may impact GDP greatly.
Disposable personal income reflects how much money people have to spend. Obviously, the more money someone has the more likely that person is to spend it. After many quarters of positive figures for real disposable personal income, those numbers have been dropping, even registering as negative in the last few months.
Less income will mean less spending, a lower GDP, and a. Show More. Read More. Popular Essays. Faustus - Is Dr. Faustus Crazy or Sane?
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Open Document. The economy is the most important indicator to judge the internal living conditions and social development of any country. It provides information about the development of basic factors like health, education, happiness, infrastructure, living standard, etc. United States is one of the largest economies that has gained huge level of hold on the world economy and controls the world economy through its internal situation.
It is clear that US has created its powerful industrial structure and per capita income is also appreciable inside the country. Further, the role of technology within the US economy is also remarkable. Technologically the US has seen highest advancement and development that is sufficient enough to grow the economy as compare to other countries. The external economic factors put the positive impact at each another and lead towards the growth of the economy and the internal economic environment. The government has their intervention into only health sector and transportation area. The country has maximum number of private companies who are successful and have earned huge profits all across the world.
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Even the government buys the required products from private companies. This economic ideology is highly success in US and ensures the proper flow of income and effective utilization of natural resources. The decision making is in the hands of private firms in the US.
Here the private companies faced the high level of leverage of such kind of economic structure in expanding their business and taking the decisions appropriately. The technological areas have brought down the revolution in entire world and America has become the pioneer of such advancements. The aerospace, computers, communication and information technology, medical, military, etc. The residents of the country get their own home that was the positive indicator for US economy.
This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. But another fact is that the people who had less technical skills and educational qualifications they face trouble in establishing their growth in the era of technology. They found obstacles in facing pay rises and other benefits at work place.
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It determines the unequal distribution of wealth and employment opportunities. At the same time, the US economy has faced huge level of growth in literacy ratio. To meet out the requirement of technology people started to get educated and it just raises the level of employment within the country. Thus, the technology works positively in the long run and negatively in the short run. But its negative consequences are negligible as compare to the positive results. Unequal distribution of wealth is another factor that could be realized in US economy over the recent past or industrial development time.