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Economic Indicators In The Automotive Industry.

1520 words - 6 pages

Impact of GDP on the automotive industry.The Federal Reserve's primary goal is sustained growth of the economy with full employment and stable prices. Real GDP is the most comprehensive measure of the performance of the U.S. economy. By monitoring trends in the overall growth rate as well as the unemployment rate and the rate of inflation, policy makers are able to assess whether the current stance of monetary policy is consistent with that primary goal. The automobile industry is one of the largest industries in the United States. It creates 6.6 million direct and spin-off jobs and produces $243 billion in payroll compensation, according to a 2001 report on the "Contribution of the Automotive Industry to the U.S. Economy" prepared by the University of Michigan and the Center for Automotive Research (CAR). No other single industry is more linked to U.S. manufacturing or generates more retail business and employment. America's automakers are among the largest purchasers of aluminum, copper, iron, lead, plastics, rubber, textiles, vinyl, steel and computer chips.The light-weight vehicle sector is made up of the total unit sales and leases of domestic and imported new automobiles and light-weight trucks (up to 10,000 pounds gross vehicle weight). This includes sales and leases to both consumers and businesses. More than 3.7% of America's total gross domestic product is generated by the sale and production of new light vehicles. As the chart below illustrates, a significant rise in sales in the light-weight vehicle sector is upon us:Table 1UnemploymentIn order to measure the importance of unemployment, the United States uses what is referred to as the unemployment rate. As defined on the William King website (n.d.), the unemployment rate is a "ratio, obtained by dividing the number of unemployed persons by the number of persons in the labor force." The labor force is those individuals who have a job or those who are actively seeking work. Currently, according to the U.S. Bureau of Labor Statistics, (2005), the national unemployment rate in July 2005 was 5%. Regionally, the unemployment rate varies, as evidenced by Table 2.Area UnemploymentRateNortheast: 4.9Midwest: 5.5South:4.9West: 5.2Table 2The unemployment rate has an affect on the car industry, especially in purchases made. If there is a high unemployment rate in one area of the country, it would mean that in that area auto sales would be lower than in another region that has a lower unemployment rate. With less disposable income, stemming from unemployment, there is less demand for buying a vehicle--whether new or used. This, in turn, would mean auto sales would decline in that area of the country.Personal incomeAccording to Andrew Ackerman of The bond buyer (2005) "Personnel income rose .5% in June, while personal consumption grew 0.8%. Personal income rose 52.9 billion to about 10.28 trillion after an unrevised 0.2% increase in May." In addition, The Bond Buyer also comments on spending...

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