## # A tibble: 1,096 × 5
## # Groups: symbol [8]
## symbol date price change text
## <chr> <date> <dbl> <dbl> <glue>
## 1 GDPC1 1947-01-01 2034. NA 1947.1,
## Growth: NA
## 2 GDPC1 1947-04-01 2029. -0.00267 1947.2,
## Growth: -0.3%
## 3 GDPC1 1947-07-01 2025. -0.00207 1947.3,
## Growth: -0.2%
## 4 GDPC1 1947-10-01 2057. 0.0156 1947.4,
## Growth: 1.6%
## 5 GDPC1 1948-01-01 2087. 0.0150 1948.1,
## Growth: 1.5%
## 6 GDPC1 1948-04-01 2122. 0.0165 1948.2,
## Growth: 1.7%
## 7 GDPC1 1948-07-01 2134. 0.00573 1948.3,
## Growth: 0.6%
## 8 GDPC1 1948-10-01 2136. 0.00112 1948.4,
## Growth: 0.1%
## 9 GDPC1 1949-01-01 2107. -0.0138 1949.1,
## Growth: -1.4%
## 10 GDPC1 1949-04-01 2100. -0.00341 1949.2,
## Growth: -0.3%
## # … with 1,086 more rowsManagers need to know: The typical lengths of expansions in their industries and look at past business cycles When a good opportunity presents itself, buy good productive capacity at a significant discount to the cost of new construction Sales are not solely based on the economy, but a companies services, products, and marketing play major roles The future course of interest rates play a key role in financial strategies Every recession is characterized by a drop in GDP (domestic production of products) Your company may see a downturn, but if it doesn’t spread to the rest of the economy it is not considered a recession Some sectors are more stable than others depending on the services and products your company provides
| your customers/products | magnitude of spending changes | timing of spending changes |
|---|---|---|
| consumer services | very stable | coincident with GDP |
| consumer nondurables | stable | coincident with GDP |
| consumer durables | volatile | coincident with GDP |
| housing construction | very volatile | leads fluctuations in GDP |
| capital spending | very volatile | lags fluctuations in GDP |
| govt. spending, federal | moderate | not always corr. with GDP |
| govt. spending, state & local | stable | lags fluctuations in GDP |
| exports | volatile | not corr. with GDP |
| imports | volatile | varies depending on product |
Gross Domestic Product
Profits are far more valuable than overall production and often can foresee a slowing of the economy. Some costs are fixed, such as depreciation, rent, and administrative staff. Some companies may accept lower profits in the short term for greater profits in the future.
Consumer spending accounts for about two-thrids of gross domestic product. When incomes fall consumers don’t reduce spending proportionally to their decline in income. The most stable category of consumer spending is services, which includes things like haircuts, utilities, and private education. Medicaid and other government programs tend to stabilize spending on health care. As a result health care spending is very stable. Big-ticket discretionary items like furniture and appliances are discretionary purchases that are postponed or downsized in a recession. Nondurables that are used regularly like food, paper towels, and gasoline have intermediate volatility.
GDP vs Consumer Spending
GDP vs Consumer Services
GDP vs Consumer Durables
GDP vs Consumer Non-Durables
Constructions of new housing varies widely making it one of the most volatile sectors. When the housing market weakens, it usually doe so before the overall economy. Similary housing is almost always the first sector to recover from a recession.
GDP vs Nonresidential Construction
Buisness purchases of plant and business equipment are called capital spendin.g Purchasing ans installing new quitment often entails long lead times so spending continues well after the overall peak businesses cycle has passed. At the extreme end aircraft production lags as much as two years behind. With such a long lag the national recession can be over and done with before the aircraft manufacturing industry feels the effects.
Repossessions don’t really affect government spending because the government can run a deficit. Most federal non defense spending is fairly stable, but program spending has substantial ups and downs. State and local government spending is more stable than average, but is still somewhat sensitive to the overall economy. With less tax revenue state and local governments have less spending money in recessions. Property taxes provide local governments with most of their budget.
Because we’ve taken steps to further globalize U.S imports and exports have grown over the past 50 years. The range of products in exports is immense the largest component being capital goods and car parts. World economies tend to move together and if an outside country is underproding a good we also see the effects of that.
We tend not to import the things on which our spending is very stable. Things like services and health care are not imported and are relatively stable when it comes to spending. Thus the types of goods we tend to import are unstable, so imports tend to be volatile.
Explan each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Goods and services produced by a country over a period of time, can be quarterly or annually reported. A drop in GDP usually means the economy is producing less goods.
Nominal GDP is the total amount of goods and services produced over a time period. Real GDP accounts for inflation and measures the actual growth of the economy.
Similar to GDP, Gross National Product is the total value of goods and services a country produces in a year plus the net income from foreign investments.
Recessions are defined by a significant decline in the economic productivity usually lasting anywhere from 6-16 months, and is usually visable in real GDP, employment, sales, and industrial production.
A leading indicator corresponds with a future movement or change in the economy.
The 2007 collapse of the market was fueled by banks irresponsibly lending high-risk loans to homeowners to pay mortgages. Everyone believed the economy would continue to grow, but interest rates began to rise. The stock market plummeted wiping out nearly 8 trillion dollars between 2007 and 2009. Unemployment climbed to it’s peak at %10 in October 2009.