Economic Factors And Consumer Durable Goods

Economic Factors And Consumer Durable GoodsINTRODUCTION TO CONSUMER DURABLE GOODSIn frugals, a un diversenessable nearor ahard wide-cutis agoodthat does not quickly wear out, or to a greater extent specific wholey, one that yieldsutilityover cartridge clip rather than be altogetherconsumedin one role. Items likebrickscould be considered perfectly durable goods, because they should theoretically never wear out. Highly durable goods such asrefrigerators,cars, ormobile phonesusually continue to be useful for three or more years of use,1so durable goods argon typically characterized by long periods between successive purchases. This effort includes all those goods which argon durable i.e. harvest-tides whose life expectancy is at least 3 yearsThe consumer durables attention stinker be broadly classified into two segments Consumer Electronics and Consumer Appliances. Consumer Appliances force out be further categorized into Brown Goods and White Goods. The key product lines under from each one segment are as follows.White GoodsKitchen AppliancesRefrigerators dry wash MachinesAir-conditionersSpeakers and Audio EquipmeSewing MachineWatches And ClocksKitchen Appliances / Brown Goods Consumer ElectronicsMixersGrindersMicrowave Ovens squeezeElectric FansCooking RangeChimneysElectronic FansConsumer ElectronicsMobile PhonesTelevisionsMP3 PlayersDVD PlayersiPad ad hominem computersAudio and video systemCamcordersCommon example of customer durables in the possession of most households is widgets. These items may include ovens, refrigerators, toasters, and gas or electric water heaters. Consumer durables of this type are intended for use on a continuing basis, and often are sold with just about type of warranty or service contract that helps to ensure the appliance leave alone continue working for an appreciable period of time. The family car is as well understood to be among the various consumer durables owned by many an(prenominal) households. Considere d a major enthronement by many consumers, the expectation is that the fomite leave alone remain operational for at least the amount of time it takes for the consumer to pay off any loans associated with the acquisition. Further, consumers anticipate that the vehicle can be utilized on a regular basis without fear of be destroyed by the frequent usage.ECONOMY ANALYSISEconomic synopsis deals with the analysis of forces operating in the overall sparing. In the tribute analysis, the evaluate course of the economy must be enquired into because overall frugal conditions and economic activities guess embodied profits and investors expectations and thereby venture the security prices in the capital foodstuff. Economic analysis has an secondant role in the investment decisions. If the economic analysis shows infrangible and vibrant economic conditions, investors will subvert the shares in expectation of earning capital profits at a ulterior stage. An expectation of sagging ec onomic conditions can lead to lower corporate profits and the security price will fall resulting from the selling pressure.The economic analysis helps to identify whether the economic climate is conducive or not for the growth of the business in habitual. It is imperative to note that when economy grows, all industries are judge to benefit. In character of weak economies, industries struggle to survive.PORTERS basketball team FORCE MODELECONOMIC FORECASTINGAn investor is interested in foretell the expected performance of the economy in general and its effect on the performance of a particular industry or on a particular company. Thus, economic forecasting gains a place of prime relevancy in the economy analysis.The expected value for the industries and companies depends on the outlook for the economy. A security analyst may start with the forecast of crude(a) Domestic ware ( vernacular domestic help product) which is a measure of national in cope and is defined as the value of core goods and go produced in the economy in one year. An analysis of the components of swinish domestic product and how these components are related to the performance of industries and companies is to a fault necessary.Economic Factors to be Considered forward Investing in Consumer Durable Goodsgross domestic product (GROSS DOMESTIC PRODUCT)Gross domestic product(GDP) is themarket valueof all officially recognized utmost goods and services produced within a country in a assumption period. GDPper capitais often considered an indicator of a countrysstandard of livingThe Gross Domestic crossing (GDP) in India was worth 1847.98 trillion US dollars in 2011, according to a report published by the World hope. The GDP value of India is roughly equivalent to 2.98 percent of the world economy. Historically, from 1960 until 2011, India GDP averaged 368.84 billion USD reaching an all time high of 1847.98 billion USD in declination of 2011 and a record low of 36.61 billion USD in December of 1960. The gross domestic product (GDP) measures of national income and output for a given countrys economy. The gross domestic product (GDP) is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time. wobble in GDP results on account ofChange in availability of resources.Change in usage of these resources, andChange in efficiency with which factors of production are used.GDP luffs the performance of the economy during the period. An increasing trend in GDP tells about an expanding economy which provides a lot of opportunities to the firms to increment the level of activities and to increase the earnings. There are two other(a) measures, Gross National Product and Net National Product which are also indicators of economic use. craftEmploymentis acontractbetween twoparties, one being theemployerand the other being theemployee. The demand for consumer durables has been rising with the increase in dispo sable income coupled with more and more consumers falling under the two-fold income families. Also, the growing Indian middle-class plays a major role in increasing the demand. This, on with a fall in the prices of durable goods in the first place due to the advancement oftechnology, easy import of components has led to an increase in the consumption expenditure on durable goodsINTEREST RATES elicit evaluate directly affect the cost of funds to the industry. Higher inters grade increase the cost of funds and thus squeezes the income of companies. On the other hand, a lower interest rate reduces the cost of funds resulting in high profit. There are several(prenominal) reasons for change in interest rates such as monetary insurance policy, fiscal policy, inflation rate, etc. regardless of the reasons for change in interest rates, the investment pattern in the economy is affected by the change in interestrates the interest rates affect the opportunity cost of the investors also , thus affecting the confederation and equity prices. So, the changes in interest rates have repercussion on the profit of the companies as well as on the market prices of securities. There are several indicators of interest rates. These are interest rates in the call currency market or the bank rate or the prime impart rate of the lending institutions. Consumer financing has become a major driver in the consumer durables industry. In the case of more expensive consumer goods, such as refrigerators, washing machines, color televisions retailers are marketing their goods more sharply by providing easy financing options to the consumers by partnering with banks.INFLATION pompousness refers to a general rise in prices measured against a standard level of purchasing military force. Inflationary pressure in the economy affects (decreases) the purchasing power of the consumers and thus has a considerable impact on the performance and favourableness of companies. High inflation rate can be considered as an trace for slower growth rate and low inflation rate can be taken as a positive sign for an expansionary phase. Inflation has a relationship with capital market as well. During inflation, the nominal required rate of return of investors goes up resulting in the decrease in bond and equity prices. Inflation can be measured in legal injury of wholesale index or consumer price index. An analysis of these indices will indicate the economic conditions expected to prevail.The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy. traffic CYCLES contrast cycles refer to cyclical movement in the economic activity in a country as a whole. An economy walk towards prosperity passes through different phases, each known as a component of a business cycle. These phases are generally designated as depression, recovery, gold rush and quoin. Interest rates and i nflation rates are high. Individual companies count different degrees of economic crises. There is a heavy pressure on their profitability resulting in lesser and lesser dividend payout and reinvestment activities. Companies even forced to shut down down some of the plants. Some industries Show above-average response and tend to pass the economy. These include capital goods industries such as consumer durables. The demand for these goods is generally deferred during recession period. But during the recovery, the demand pattern outperforms the general demand level. However, during the same period, industries traffic with essential commodities such as food, are less responsive. On the other hand, these industries would tend to outperform the general level during the recession period financial POLICY, MONEY SUPPLY AND LIQUIDITYThe fluidness in the economy depends upon the gold supply which is regulated by monetary policy of the government. Reserve Bank of India has been adopting several measures to regulate the money supply and liquidity in the economy. Business firms require funds for expansion projects. The capacity to raise funds from the market is affected by the liquidity position in the economy. The monetary policy is designed with an objective to maintain a balance in liquidity position. Neither the excess liquidity nor the shortage is desirable. The shortage of liquidity will tend to increase the interest rates while the excess will result in inflation.Monetary supply and monetary environment affect share prices through affecting the discounting rate. An easy monetary policy is expected to result in decreasing discount rate. Money supply also affects the real economy throughChange in growth in demand level,Change in growth of supply position otherwise FACTORSBesides the factors mentioned, there are cartain other factors which should also kept in mind while economic analysis. Some of these factors are-Cheap imports from Asiatic Countries The cheap i mports of consumer durable products from countries like China, Singapore etc is a major concern. change magnitude competition Presence of a large number of players in each segment leads to high rivalry. Also, the unorganized market is yet very strong in the case of many consumer durable goods. The pie of the unorganized sector is comparatively large in most of the segments, hence increasing the competition.Fluctuating birthday suit material prices Rising input costs of raw materials viz. copper, steel, aluminum and plastic the major raw materials required for this industry will badly put pressures on margins.Unfavorable Duty Structure Top players in the consumer durables industry have been demanding a more favorable import avocation on durable components imported by them. Take the case of LCDs which is the immobileest growing segment right now the industry has beendemanding a reduction in the import duty. Contrary to this is the case of set wind boxes, where 80% of the set to p boxes are imported. The industry has been recommending that the custom duty on STB should be increase by 5% to 10% in order to boost domestic manufacturing.Continuously changing technology a challenge The consumer durables sector faces the challenge of a continuous change in technology and the inability to cope with it. High-end consumers prefer changing their goods along with the up-gradation of technology and manufacturers have to make sure they cater to this requirement.CONCLUSIONThe outlook for the industries and companies depends on the outlook for the economy. If the outlook in the economy is bright and upbeat, this may be considered as good indicator of growing profit of the firm. The general optimism is reflected in the security prices. The linkage in economic environment and the security prices is obvious and critical. This analysis helps to decide when to invest and where to invest. The Indian market is fast moving towards high-end products and the importance of media an d entertainment is growing among the young market. The consumer durables industry needs to constantly focus on innovation and needs to come out with product variations across categories to meet the different expectations of a alter class of customers. With easy availability of finance, fall in prices due to increased competition, growth of media, growth in consumer base of rural sector, the consumer durables industry is growing at a fast pace. Given these factors, a good growth is projected in the future, too.