Financial Markets and Institutions in the USA - Essay Example

In the case of an individual from Tokyo planning to set up a business in the United States of America, it would be imperative that a good research study on some of the major economic indicators of the US is carried out. In this case, Gross Domestic Product, inflation rate, and the unemployment rate would be used to make an informed decision of whether to establish the enterprise in the US instead of native Tokyo in Japan.

Gross domestic is one of the leading predictors of the economic size of the country and it significantly influences the financial market and economic cycles which would be useful in formulating a business plan and target projections (Madura,2008,99). Good GDP figures indicate the positive performance of the overall economy and vice versa. The inflation rate is a factor in price and cost of input factors and therefore significantly influences investment decisions. It would therefore be imperative for the trader from Japan to analyze this factor in the context of the US economy. The unemployment rate reflects the consumption level and living standard in general. In the event that unemployment in the US is relatively high then this would send wrong signals for a better business future in the country.

            Considering the trend of the above-mentioned factors in the past 12 months in the US,  it would be easier to make an informed decision in respect of viable engagement.         

From the GDP table above which shows the trend in the four quarters of the year 2012 and the first quarter of 2013, it is worth noting that the economic growth of the USA is headed for a better 2013 as seen in the comparison with the start of 2012 at GDP percentage based on chained 2005 dollars of 2.0. Even if the comparison is also taken from GDP percentage based on current dollars the disparity is marginal and this sends positive signals as far as the economic potential of the country is concerned. Positive GDP predicts a better market response for any potential investor and it would therefore important for the Japanese investor to consider starting the venture.

Nonfarm payroll employment over-the-month change, seasonally adjusted, April 2012–April 2013Month                                

Month

Employment change

Apr 2012

112,000

May 2012

125,000

Jun 2012

87,000

Jul 2012

153,000

Aug 2012

165,000

Sep 2012

138,000

Oct 2012

160,000

Nov 2012

247,000

Dec 2012

219,000

Jan 2013

148,000

Feb 2013

332,000

Mar 2013

138,000(p)

Apr 2013

165,000(p)

From the change of employment rate that can be observed above, it is important to note that the trend in unemployment has been steady and changes very insignificantly. However, in the latest period running through March and April 2013, there is a slight fall in this change and this means that level of income is still on the right track. It would therefore be viable for the Japanese lady to kick-start the business as the US future is bright except for small disturbances that are likely to arise from economic cycles. Unemployment is one of the most important indicators of overall economic progress and this is clear from the socio-economic and political concepts that surround employment in society (Madura, 2008, 99). When the rate of unemployment is fairly down, there are better business prospects in the country and this can be predicted to be working out for the US from the data provided by the Federal Bureau of statistics.

Inflation data for Jan 2012 to March 2013

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Ave

2013

1.59%

1.98%

1.47%

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

2012

2.93%

2.87%

2.65%

2.30%

1.70%

1.66%

1.41%

1.69%

1.99%

2.16%

1.76%

1.74%

2.07%

Inflation is an important concept for any investor since it gives an indication of the direction of the economy. It is important to note from the trend above that US has been experiencing a steady decrease in inflation rate and this is particularly reflecting the positive economic environment in 2013. It can be seen from the inflation rate data above that there is a relative fall from January to march with a hitch in February. The trend of 2012 can be interpreted to mean that prices will still remain relatively constant hence making the business environment welcoming.