Estimates

Why are the Governments GDP estimates so important to Business People?

Why do business people pay such close attention to the governements GDP quaterly estimates???? Is it so they will know what is hot and what is not?

Public Comments

1. It can affect futures. Like when the earthquake happened in Chile last week. They are a huge copper exporter, so copper prices shot up. Then they surveyed the mines and found there was very little damage, so prices sunk back down.
2. GDP is one of many economic indicators. It is important to business people because it helps them determine what they need to do the run the company. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time. An economy is a self-licking ice cream cone. If a bunch of people loose their jobs they buy less stuff. As they buy less stuff companies have to produce less to meet demand. As demand declines producers have to make less stuff. In making less stuff they lay off workers. The GDP tells not how individual businesses are doing, but how the composition of all companies are doing for a nation. Hope that helps.
3. GDP is so important becuase an increase in GDP will make an increase in the standard of living, which means that people will have more money to spend with less time at work, people will have more lesiure time, they will have more choices in life becuase an increase in GDP means and increase in the capacity to produce goods an services, GDP is one of the most important parts of the united states economy, with out it we would be a failing country with no benifits.
4. The Consumption Function: GDP calculated by the Consumption Function (GDP = C + I + G + NX) is based on demand within an economy. GDP is usually caluclated this way. Businesses find GDP forecasts useful: GDP forecasts indicate how much demand will be in the economy in the future. Businesses find it increasingly important as their size and scale of operations increases that they know the shifts in demand in the economy. This allows them to roughly anticipate changes in demand that will affect the demand for their products. If a recession is imminent, a firm would order less raw marerials and cut back future production as consumers would then be poorer and wouldn't be able to consume the current level of output. This can potentially spare firms from having excess demand [shortages during booms] or excess supply [surplus during recessions]. Seasonal GDP and Quarterly GDP: GDp is sometimes calculated per quarter and per season. Retail outlets have seasonal 'peak' sales periods, usually around Christmas, as that is when consumer demand is the greatest. In other quarters, when Xmas and Xmas shopping are months away retail stores generally experience a much lower level of demand for their products. Most firms do experience disparities in demand per season and/or quarter, so they wish to stock the correct amount of product to satisfy demand - avoiding excess demand or supply. What's hot and what's not: What's hot is related to the consumer tastes and preferences of that period, the income of consumers and the season of the time concerned. Not many consumers are going to buy woollen gloves in the summer time.