Product Purchases and the Economy

ECO/372

October 12, 2015
Product Purchases and the Economy

A new car purchase is one that takes a large amount of consideration and budgeting. The most important economic indicators to consider when investing in an automobile purchase are unemployment rates and interest rates. These indicators will assist a person when deciding whether to purchase new or used. Is the right time now or later to purchase a truck?
Economic Indicators The automotive sector is a cyclical business. Since it is a cyclical business, changes in the revenues and earnings of automotive companies are more likely due to the state of the economy and the strength of the consumer. Sales in the automotive sector are higher when economic activity is strong and people feel confident about their future economic prospects. In this environment, more people are likely to make an automobile purchase. Clearly, unemployment is a major factor in this environment. People do not feel optimistic about a major purchase when they are unemployed. People without jobs are less likely to have the means to afford a car. Someone with a job is not likely to make a major purchase if he is worried about losing his job. In 2009, the unemployment rate was between 8% and 10%, and auto sales were 9 million on an annualized basis. In March 2015, the unemployment rate was 5.5% and auto sales were 16 million. Interest rates affect the financing costs of purchasing a car; lower interest rates make the car cheaper. It is not enough to defy a poor economic environment, but it may make a difference for a few people who are sitting on the fence.

Supply & Demand Car sales are rising steadily in the U.S., and auto makers need more plants to meet future demand. U.S. auto sales rose 7.6% in 2013 to 15.6 million cars and light trucks.