Economic & Industry Analysis (Individual Assignment)

1. List out the factors that effect the cyclical changes in the economy. Briefly explain the
factors by relating it to the industry that may affect with the cyclical changes.

Inflation
Higher inflation is generally negative for stocks and it hurts the stock
market in general. It also will cause more uncertainty about future prices
and costs, and it harms firms that cannot pass through cost increases.
Firms with high operating leverage and financial leverage might benefit
from high inflation. While natural resource industries might benefit from
inflation if their costs are not increasing with inflation, because their input
will likely sell at higher prices.
Industries with high operating leverage benefit because many of their costs
are fixed in nominal (current dollar) terms, whereas revenues increase
with inflation. Industries with high financial leverage may also gain,
because their debts are repaid in cheaper dollars.


Interest Rates
Financial institutions, including banks, are typically adversely impacted by
higher rates because they find it difficult to pass on these higher rates to
customer, for example lagged adjustment.
Interest rate also hurts the stock market in general. Banks generally benefit
from volatile interest rates while housing and construction industries are
hurt by high interest rates.
High interest rate also benefit retirees whose income is dependant in
interest income.


International Economics
Both domestic and international events affect the value of the US dollar. It
depends on value of dollar whether weaker dollar or stronger dollar.
Weaker US dollar helps US industries because their exports become
comparatively cheaper in the United State while the goods of foreign
competitors become more expensive in the United State.
Economic growth in world regions or specific countries benefits industries
with a large presence in the areas. It is affect on free trade zones as it assist
industries that produce goods and services that previously faced quotas or
tariff in partner countries.

Consumer Sentiment
Consumption spending has large impact on economy. Optimistic
customers are more willing to spend and borrow money from expensive
goods, such as houses, cars, new clothes, and furniture.
The performance of consumer cyclical industries will be affected by
changes in consumer sentiment and by consumers willingness and ability
to borrow and buy means it affects consumption.
Hence the GDP where including optimistic versus pessimistic consumers.




















2. List out the factors that affect the structural changes in the economy. Briefly explain the
factors by relating it to the industry that may affect with the cyclical changes.

Demographics
Study said that demographics include much more than population growth
and age distributions. Geographical distribution of people, the changing
ethic mix in a society, and changes in income distribution also include in
demographics.
These impacts on the consumers need and the potential market size for an
organizations goods and services.
Therefore, industry analysis needs to carefully study demographic trends
and project their effect on different industries.


Lifestyle
When deal with how people live, work, form households, consume, enjoy
leisure, and educate themselves it is what we called lifestyle. Consumer
behavior is affected by trends and facts.
The rise and fall of designer jeans, chinos, and other styles in clothes
illustrate the sensitivity of some markets to changes in consumer tastes.
The increase in divorce rates, dual-career families, population shifts away
from cities, and computer-based education and entertainment have
influenced numerous industries, including housing, restaurant,
automobiles, catalog shopping, services, and home entertainment.







Technology
It may affect numerous industry factors, including the product or services
and how it is produced and delivered.
These influence barriers to entry, make or buy decisions and investment in
innovation, such as automation, investment incentives and the rate of
technological change. It also included R&D activity.
Changes in technology have spurred capital spending in technological
equipment as a way for firms to gain competitive advantages.
It is essential for an analyst to become aware of how technology can be a
benefit or a threat to an industry.


A Politics and Regulations
Some regulations and laws are based on economic reasoning. Due to
utilities position as natural monopolies, their rates must be reviewed and
approved by a regulatory body.
These include government regulation such as employment laws,
environmental regulations and tax policy. Other political factors are trade
restrictions and political stability.
Regulatory changes have affected numerous industries. An example is the
numerous regulations and inspections introduced to protect against
terrorist attacks. Changing regulations and technology are bringing
participants in the financial services industry-banking, insurance,
investment banking, and investment services-together.
Regulations also affect international commerce. International tax laws,
tariffs, quotas, embargoes, and other trade barriers have a significant effect
on some industries and global commerce.