Economic Analysis: Economic Analysis Top down approach: Top down approach Economic Industry Company Importance of economic and industry analysis: Importance of economic and industry analysis Variation in stock prices is attributed to: Market influences Industry influences National Economy: National Economy Affects: Corporate profits Investor attitudes expectations Forecasting techniques: Forecasting techniques Short term Intermediate Long term Business forecasts: Business forecasts % change in Gross domestic product GDP = consumer spending + investment + government spending + (exports − imports) % change in Gross national product GNP = GDP + net receipts (total income from abroad) Anticipatory surveys: Anticipatory surveys Government and industry representatives Budget speeches, economic surveys Business week and fortune Indicator approach: Indicator approach Leading indicators Coincident indicators Lagging indicators Business cycle : Business cycle Relationship with the economy: Relationship with the economy Procyclic A procyclic (or procyclical ) economic indicator is one that moves in the same direction as the economy. GDP Countercyclic A countercyclic (or countercyclical) economic indicator is one that moves in the opposite direction as the economy. Unemployment rate Acyclic An acyclic economic indicator is one that has no relation to the health of the economy and is generally of little use. Money: Money Rate of growth of money supply are important in determining GNP. Sound monetary policy. Econometric model building: Econometric model building Applies mathematical and statistical techniques to economic theory. Forecaster thinks about interrelationships between the economic variables. International economic factors: International economic factors World becoming interdependent. Exchange rates Disposable income, demographic factors and demand: Disposable income, demographic factors and demand Consumer spending Women in labour force Other Economic factors: Other Economic factors Inflation Interest rates Energy crisis PEST analysis: PEST analysis PEST analysis is concerned with the environmental influences on a business Political Economic Social Technological Political: Political factors include areas such as tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability. Economic: Economic factors are economic growth, interest rates, exchange rates and inflation rate. Social: Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Technological: Technological factors look at elements such as R&D activity, automation, technology incentives and the rate of technological change.