Free Macro-Economic Indicators Essay Sample
Economic Indicators are extremely crucial to investors. They significantly influence investment decisions to be made in the near future. This is especially true with leading indicators that change in advance before the general economy as opposed to lagging indicators which change after the general economy. Target organization is a business that deals in cosmetics and fashion design clothes. Its clientele mainly come from the middle class and are mostly ladies. Target is acutely sensitive to most economic indicators, but the following three conditions have the biggest impact on its operations.
a) Consumer Price Index (CPI).
b) Unemployment Rate.
c) Consumer Credit Report (CCR).
Consumer Price Index (CPI)
Target organization mainly deals in luxurious goods and services for the middle class brood of women. As such, my organization’s economic security is pegged on the consumer’s purchasing power. Unfortunately, this purchasing power of my customers has been hit by high inflation witnessed in the recent recession and economic gloom. This inflation is denoted by the present high figure of Consumer Price Index. Consequently, Target has experienced slimmer profit margins as revenue is at its lowest level in many years. Furthermore, Federal Reserves Board’s proposal to hike the market interest rate as a remedy for inflation threatens the future profits of Target.
Therefore, Consumer Price Index values are particularly crucial to Target because it measures the purchasing powers of customers. My organization’s management compares past and present Consumer Price Indices to predict customer’s purchasing powers. This enables me to deduce a fair figure of future revenue collection for Target organization.
Retrenchments and job cuts that have been experienced since the 2007 economic recession has further eaten into Target’s revenue collection. Although it is a lagging indicator, unemployment figures are essential to both Target’s strategic plans and profits. This is because a high unemployment rate means that few people will have the requisite purchasing power. On the other hand, low unemployment means more people are willing to spend on Target’s services. As such, studying the national Target’s profits has suffered most from the rising unemployment rate because it deals with luxury goods. In the wake of these changes, Target’s customers have reduced their spending on its services. At the same time, new customers are hard to come by because of afore mentioned economic reasons.
Consumer Credit Report (CCR)
Consumer Credit Report is important to Target organization. Since consumers make up half of Gross Domestic Product, my organization is keen to establish the credit facilities at the disposal of its customers. The recent credit crunch reduced the sales revenue of Target organization. Consumer’s income was only enough to cater for the most basic goods and services with quite a small proportion on luxurious services like cosmetics. This explains why Target Organization is looking forward to increased credit facilities to consumers. At the same time, Target is keen on ensuring that this credit is kept at manageable levels to guard against the possible inflationary tendencies.
In conclusion, Target has suffered setbacks because of the 2007 recession. Because most of its products are luxury oriented, Target organization’s customers were unable to spend on its services like before. The positive economic gains that are taking shape are expected to alter this situation.