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Macroeconomic Forecasts
Kristen Tranmal
Econ5
Yohannes Mariam
May 7, 00
Macroeconomic Forecasts
Macroeconomic forecasts are means to interpret what has happened in the past and predict what will happen in the future based on current events and potential future events. The use of such forecasts must be done with caution, as they are just that forecasts. The information provided below was obtained to provide You Called Cellular with information pertaining to the national economy as well as what is being predicted for the future. It is these forecasts that will be used to evaluate current operations along with future operations.
Indicator Forecast 1 Forecast Forecast Average
00 004 00 004 00 004 00 004
Real GDP .7 .6 .1 4.7 1. . .56 .86
CPI Inflation . .6 . .4 .0 .0 .5 .7
Unemployment Rate 5.8 5. 6. 5. 6.0 5.5 6.0 5.7
Interest Rates 5.0 6.0 4.66 6.88 5.0 6.0 4.8 6.
Retail Trade .7 5. 8.0 1.0 .0 4.0 4. 7.1
Investment Spending 4.8 5. . 1. 1. 4.6 .7 .
Sources
Forecast 1 - Federal Reserve Bank of Philadelphia
Forecast - Oregon Office of Economic Analysis
Forecast - 00-004 Economic Forecast and Industry Outlook for California & Los Angeles Five County Area Including the National and International Setting
Looking at this information it appears that all three forecasts believe that the real GDP will increase in the next year. Indications are for an increase in inflation, interest rates, investment spending, and retail trade. All three forecasts indicate a decrease in unemployment, even if only slightly.
What does this mean for You Called Cellular? The numbers indicated above provide a great deal of potentially useful information that will help us determine which direction we should go in relation to our current operations as well as our future ones. The numbers provided show promising opportunities for our company in the near future.
The interest rates and inflation rates that are forecasted to increase are not at the level that our company should be concerned about currently. In all actuality there wasn't much more room for the interest rates to decrease. In looking at the other numbers it appears that economists are predicting a turn out of the current slide that the economy was headed towards and heading toward an upward movement. This is a good sign for any company involved in selling retail goods to the average consumer.
If the numbers were to show a decrease in retail trade and investment spending it could spell trouble for our company as many see our product as a luxury, not a necessity. How will we move forward with our planning for the next two years based on these numbers? Seeing that these numbers are showing a potential improvement to the nation's overall economy it also indicates the potential for more individuals to have excess spending money for items they would not necessarily consider.
In realizing this opportunity we must move to promote our product as the most economical cellular plan on the market before our competition joins us in reducing their rates as we have recently done. By maintaining the lower rates established earlier this month and marketing the plans we have to offer as being an alternative to their home phone service we should be able to maintain market presence and move towards increasing profits.
Customer service has also been an area that we have been focusing on in the last year. With the forecasts showing a slight improvement, but not one that is exponential, we must maintain our focus on providing the best possible service to our customers. That portion of our future plan will not change and may actually gain more focus depending on how our competition reacts to the recent price decrease. We must remember that our customers can be fickle and customer service is one of the keys to maintaining and gaining customers.
We should also venture into the prospect of reinvesting a portion of our profits into better technologies to stay on the cutting edge of cellular service. Without advancing in technology, we apt to be left behind within a few short years. This will have to be examined further as we are still in our initial six months of price reduction, and have not seen the full impact. However, if sales continue as they have in the last month even with the current economic situation, it should pose no problem in the future.
A portion of the biannual operations plan included expansion into other markets and potentially other types of communication services. This should still be a potential focus of the company, but we will want to examine regional statistics prior to any moves being made. I would caution that too much expansion in a somewhat shaky economic time, even if it is on the rebound, could cause problems for the company if it expands to quickly. Test marketing these expansions in known market areas would be the best indicator of how they are going to sell.
In summation, You Called Cellular is in a position to benefit greatly if these economic forecasts hold true. It will be interesting to see how the near future plays out with the ending of the military conflicts in Iraq. These forecasts were done prior to the war breaking out, and this could potentially change the actual figures significantly compared to what was previously forecasted.
Based on the information provided You Called Cellular should move forward with the current operational plan that had been developed at the beginning of the year. Adjustments can be made to individual projects or areas as new more definite information is available. The best way to move forward is to do so conservatively, with the customer in mind at all times. Being that we are a company that provides a product as well as continued services we must keep that as our main focus.
With those thought in mind You Called Cellular should move forward with the continued price reduction in place, work towards expanding their market share based on the potential for increased disposable income, and investigate reserving a portion of the profits for new technologies. There must be continual monitoring of not only the economic structure on a national level, but regionally and locally as well. With these conservative goals as the focus for the next two years You Called Cellular has not only the potential to survive in an unstable environment, but also the potential to flourish.
References
00-004 Economic Forecast and Industry Outlook for California & Los Angeles Five
County Area Including the National and International Setting
http//www.laedc.info/pdf/Forecast-00-0.pdf Obtained May 7, 00
Oregon Economic and Review Forecast (00)
www.oea.das.state.or.us/economic/forecast00.pdf Obtained May 7, 00.
Research Department (00). Livingston Survey. Federal Reserve Bank of Philadelphia.
http//www.phil.frb.org/files/liv/livdec0.pdf Obtained May 7, 00.
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