Automotive Industry and Macroeconomic Forces Research Proposal

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In times of inflation, typically inflation rates rise. This tends to slow business activity and slow inflation ("Interest rate," 2009).

Producer Price Index -- The producer price index is the "relative measure of average change in price of a basket of representative goods and services sold by manufacturers and producers in the wholesale market" ("Producer price," 2009). It is made up of three indices: finished goods, intermediate goods, and raw or crude materials.

Trends for Economic Indicators and Prediction for 18-months:

Graph 1: Inflation Rate ("Countrywatch data," 2009; "Field listing," 2009).

Graph 2: Gross Domestic Product (U.S. Billions) ("Countrywatch," 2009; "BEA news release," 2009).

Graph 3: Unemployment Rate ("Economy," 2009; ).

Graph 4: Producer Price Index ("Economy," 2009)

Graph 5: Personal Income (Billions U.S.) ("Personal Income," n.d.; "State personal," 2009)

Graph 6: Interest Rates (30-year) ("30-year," 2009; "H.15, 2009")

How the Automotive Industry Would be Affected by These Predictions: Continued moderate, but slightly decreasing, inflation will want to keep prices high, in the automotive industry.

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This will include pricing for manufacturing components, as well as vehicles themselves. However, the anticipated increase in unemployment rate and the slight decrease in personal income, due to unemployment, will fight against high prices as businesses struggle to maintain revenue streams. The decline in producer price index will be beneficial to American automotive manufacturers, helping them reduce costs and be more price competitive. Steady interest rates will not be the primary factor in credit affecting the automotive industry. Instead, the stranglehold financial institutions have on credit, despite incentive from the Federal Reserve, will continue to be a negative factor for businesses looking for operating credit. When factored together, the economic predictions will likely see 18 months rather similar to the first quarter of 2009/last quarter of 2008. These figures predict that the economic rebound, that would be a boon to the automotive industry, will take longer than 18 months.....

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