Description of the economic indicators

Discuss about the International Business for Market Prolifically.

With the rapid growth in industrialization and technology in the past few decades, the economy of the international business and market prolifically has changed in varied ways. The internal market that significantly boosts the economic condition of a country provides an overall analysis about the nature and conditions of the market. One of the most boosted and prolific economy in the present international market is the UK economy (Anderton, 2010). Despite facing huge turnovers and drawbacks in the past it has been the most successful and firm economy in the entire world. The country’s economy is measured by the gross domestic product and is the fifth largest national economy in the world. The economy of UK has been the strongest economy as far as unemployment, interest rates and inflation is concerned. Being one of the most developed countries in the world UK prolifically obtains its revenue through exportation of financial services but it also record deficits through food, goods and commodities.

In this report we will strategically analyze and evaluate the economic conditions of the UK that would enable us to provide a key concept and clear visual about the key economic indicators. An economy can be analyzed through the economic indicators like the GDP, unemployment, inflation, debt to GDP ratio and Tax rate. Evaluating all these key factors the report will prolifically provide a significant overview about the UK economy (Arndt and McKenzie, 2011). Following the description of the economic indicators, trend analysis and current economic conditions will enable to suggest a clear visualization of the chosen economy.

It is mandatory to analyze and evaluate the international market to figure out the economy of a country. Different key indicators play a significant role in evaluating the international market which proportionately helps to understand the condition of the country’s economy. Thus, to understand the key prospects of the UK economy it is quite important to have a detailed description about the key economic indicators as well as understand what economic indicator is (Artis, 2012). Economic indicator can be defined as a significant piece of economic data basically of macroeconomic scale which is used by economists and analysts for interpreting the future or current investment policies to understand or judge the economy’s overall health. Some of the key economic indicators are as follows:

GDP: Also termed as the gross domestic product, it is the expansive quantitative measure of a country’s entire economy activity. Specifically, GDP prolifically represents the monetary value of all the services as well as the goods produced within the geographic borders of a country over a specific period of time. GDP is actually calculated as a basic comparison to the previous year or quarter (Barnes, 2015).

Trend analysis of the economic indicators

Unemployment: It is defined as significant phenomenon that prolifically occurs during economic unsettlement. It is when an individual is actively trying for employment but unable to get employed or find work. It is often used as a measure to understand the health of the economy (Blanchflower, 2015). The most significant measure of unemployment is the unemployment rate, i.e. the number of employed individual divided by the number of individual in the labor force. Unemployment basically hits a nation during economical instability which is calculated by the rate of employment.

Inflation: It is defined as the rate at which the common level of prices for services and goods is rising and as a result, the purchasing power of the country’s currency is rapidly falling. This negatively impacts the country’s economy growth and it is the role of the central banks to limit the rate of inflation and significantly avoid deflation for keeping the operations of the economy running smoothly (Botham, 2015).

Debt-to-GDP ratio: It is the ratio in between the debt of the nation’s government and its gross domestic product (GDP). By the comparison of what a nation have a loan from to what it produces. The debt-to GDP ratio prolifically indicates the nation’s ability to return back the debt. It is mostly expressed as a basic percentage; the entire ratio can be significantly interpreted as the time i.e. number of years needed by the government to clear the debt if GDP is bestowed entirely to the payment of debt (Cameron, 2015).

Tax Rate: It is the percentage that is calculated at which a corporation or individual is taxed. The tax rate can be defined as a tax that is imposed on the taxable income or on the earnings of a corporation by the government.

Trend analysis enables to understand the economy by evaluating the economic indicators. UK economy is one of the most influential economies and by the prolific help of the economic indicators it will help to understand the UK economy in the past six months more vividly.

GDP: The economy of UK has significantly expanded 0.4% on quarter in the first three months of 2016. Analyzing in line along with the preliminary estimates and slowing down 0.7% expansion in the last quarter of 2015. One of the major reasons has been the customer spending while the business investments shrink more than that was expected (Cameron, 2015). The next three months GDP growth of UK raised about 0.6% higher than that of 0.4% as annual rate has significantly slowed down to three year low. This has significantly affected the growth rate in UK. The biggest segments has been the services sector i.e. government, health, education, real estate, wholesale and trade, retail trade and insurance which has accounted about 79% of the total GDP.

Unemployment: The rate of unemployment in UK drastically lowered to 4.9% from 5% in three months to May in the current year than previous year. According to the reports it is the lowest since 2005 and has bettered than that of the market expectations of about 5%. The unemployment rate in UK has basically averaged 7.15% until 2016. It is expected that the unemployment rate will be 5.10% by the end of the quarter (Cogent Inspection, 2016). As per the econometric models it is assumed that the unemployment rate is projected to turn around 6.70% in the upcoming future.

Inflation: The consumer prices in United Kingdome have prolifically went up by 0.5% as of June 2016. Analyzing the inflation rate of UK in the last six months there has been a great increase of 0.3% in the prior months of June which was quite higher than the market expectations of 0.4% gain. The major reason for the price stability in the United Kingdom is due to the Bank of England. The inflation rate is averaged at 2.61% in United Kingdom which has increased all time high 8.50% and a record low -0.10% (Green, 2016). Evaluating the conditions of the economy the inflation rate has been prolifically stable that that of 2015.

Debt-to-GDP: United Kingdom has been facing the debt-to-GDP of about 84% of the country’s gross domestic product in 2016 approximately £1,620 billion about 5.20% less than that of 2015. The national debt of UK is the entire amount of money that the government of UK owes to the private sector. Analyzing the budget deficit i.e. the amount government borrows per year during 2015-16 is £9 billion. The debt-to-GDP has significant impact on the economy of the United Kingdom. The deficit has potentially lowered but the debt is rising up (Green, 2016). Although there is a hike in the GDP by about 80% but by the UK standards other countries have much bigger problems as the national debt tallies of 120% to 225%.

Tax Rate: The tax rate of UK is calculated on an individual’s income which is above than the personal allowance and how much of the income falls within each tax band. There are various other tax free personal allowance, which is the income amount which an individual don’t have to pay tax on (Green, 2016). There is also some income tax which is tax-free. The tax year in UK if calculated from April to April.

Economic indicators play a key role in having significant impact on the economy of a country. Analyzing the decision of UK exiting from the European Union has prolifically fueled the political and economic uncertainty within the country. In such situations economic indicators play a significant role in evaluating the current scenario of the UK economy.

GDP: Before the voting to leave the European Union, it was evaluated that the UK economic growth was prolifically slowing. While services in the various field were still expanding at a good rate. Manufacturing and construction was struggling big time. According to the official data that analyzes the referendum impact has started in August, but unofficially it has been suggested that indications provide for a further slowdown (Heo, 2016).

The performance of the UK economy has turned into subdued performance in 2016 first quarter, the second quarter data is also impactful but it is not yet clear how much influence is generated by the Brexit referendum. Overall the current GDP growth is about 0.6%, 7.3% increase in size of the economy when compared to the low time. The annual change is about 2.1% (Humphries, 2016).

Unemployment: The unemployment rate of UK is falling rapidly and it is one of the major economic stories in the last quarter of 2015. Initially the employment was led by the self employed and part timers have significantly changed and the growth has broadened in including full time employees. But in this instance, the improvement pace has slowed down at a rapid rate. Even there is a deficit in real wages i.e. about 8% since the financial crisis (Humphries, 2016). Currently the employment rate in UK is 4.9% and the regular earning growth as of August is 2.4% and employment rate 74.4%. The average rate of the growth of annual pay has comparatively slowed down but still is rising faster than inflation which can provide real pay growth.

Inflation: The inflation ration is exceptionally low because of the responsibility taken by the Bank of England. The low inflation rate is actually driven by the fall in prices of oil, supermarket price wars and the sterling strength of keeping down the imports cost which has significantly a boon for the household finances. As of the policymakers the bank of England has significantly stressed in for the low price increases are actually because of the external factors not because of the deflationary spiral (Meares, 2016). The current consumer price inflation rate is 0.5% with RPI being 1.6%. It is expected that the rate will be very low near about zero for upcoming months, but will gradually increase.

Debt-to-GDP ratio: United Kingdom still borrows at a higher ratio that has significantly increased the debt –to-GDP ratio. The government is struggling to put an end to the budget deficit of UK. Compared to the previous quarters of 2015 and early 2016 the debt is forecasted to fall as a significant percentage of the GDP. Due to the strengthening of the tax receipts the borrowing figures have also started improving (Mouncey, 2016). Currently UK is at a much stable position as far as the deficit is concerned but it still continues to borrow more than that of other countries like Canada, Japan and Italy. Although the tax receipts have significantly boosted the debt ratio, it is still in the mediocre phase considering the recovery strength. It can be evaluated that the accumulated burden of debt is much higher than 80% of the nation’s GDP (Toothill, 2016).

Tax Rate: The corporate tax rate of United Kingdom currently stands at 20% and the sales tax rate stands equally at 20%. United Kingdom’s corporate tax is significantly averaged 32.66% and it reached a record low in the year 2015 about 20%. Analyzing the sales tax rate which is averaged at a rate of 16.53%. Currently both the taxes are charged on individual prices of certain services and goods where as the corporate tax is calculated while exercising the net income of the companies. The tax rate helps the government to ease off the debt-to-GDP-ratio (Toporowski, 2016). Currently UK is facing huge downfall on tax issues because of the Brexit interference and must be balanced to support the economy sterling.

Conclusion

The report strategically analyzes the major aspects of the UK economy that is boosted by the economic indicators. The economic indicators prolifically provided a clear overview about the country’s economy over the past six months and the current scenario (Wallis and Andrews, 2010). The major aspect of the report is provide a clear overview about the market and economical synopsis of United Kingdom which is prolifically going through the hardships of Brexit which has somewhat created a misbalance within the economy. The report critically empowers the key prospect of the UK economy analyzing in detail about the future references.

References

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