Corporate Economic Conditions Report 17 April 2013 | PepsiCo | SECTION 1: EXECUTIVE SUMMARY
Economic Conditions Overview:
Overall economic conditions are expected to improve over the next two quarters. As part of the monetary policy (quantitative easing part 3), Federal Reserve continues to buy bonds to influence low interest rates in order to increase investments. A decrease in unemployment and an increase in private consumption will drive the economic growth for the next two years.
Expected direction of change in economic aggregates:
The drivers for the major changes in the economy will be steady growth in GDP and the decrease in unemployment. Additionally inflation rates are forecasted to remain unchanged and
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The Sequester includes spending cuts with amounts worth $85 billion. Such cuts will have significant impact on the GDP and can reduce the GDP average over the next two quarters by 0.25% to 1.85%. According to Economist Intelligence Unit report, if the Sequester remained activated for an entire fiscal year, GDP would fall to 1.6% and then to 1.4% by end of 2013 calendar year. This will not have a devastating impact on US economic recovery, however, will delay the rebound from the recession years of 2008-2009.
UNEMPLOYMENT RATES
From 5.8% in 2008, the unemployment rate spiked to 9.6% in 2010 and was marked at 8.1% in 2012. The unemployment rate has been stable since September 2012, hovering just below 8.0%. By February of 2013, the reported unemployment rate is 7.7%.
Economic growth for 2013 is expected at 1.9%, decreasing the unemployment rate to 7.5% by end of the year. Unemployment rate is predicted at 8.0% by the end of Q2 2013. By the end of 2014, forecasted economic
Identify economic factors that affect the real GDP, the unemployment rate, the inflation rate, and a key interest rate. How do you predict the economy will perform in the next two years given the current state of two of the economic factors you identified? How might your organization be affected by these changes?
The 8th Amendment has protected us against many unusual punishments and can be seen in Waters-Pierce Oil Co. VS Texas, Weems VS the United States, and Gregg Vs Georgia. In the first case, a company was sentenced to a penalty of revocation and a fine of over $1.6 million, violating the amendments. This case settled a general standard for judging whether the fine was unusual or excessive. The next case, Paula Weems was punished with 15 years of hard labor prison, loss of all political rights in prison, permanent surveillance after release and a fine of 4000 pesetas. The effect of the 8th amendment helped this case to establish the “Principle of proportionality” when the punishment was being handed down. In the third case, Troy Gregg was found
According to Staff review of the Economic Situation for January 28-29, the economic growth rate picked up in the second half of 2013. There was a gradual increase in the total payroll employment and a decline in unemployment rate. Consumer price inflation was still performing poorly than expected, while longer-term inflation expectations remained stable.
QE3 began in September of 2012 with a gross domestic product increasing by 4.5%, which is an impressive gain over the previous years of very little growth, GDP currently, has had a relatively steady increase over each quarter amounting to 3.9% for the most recent data. However, while GDP is of serious concern, inflation and unemployment rates have not been so easily persuaded. According the Bureau of Labor Statistics (1), in September 2013 unemployment was in a downswing but still resided at 7.2%, much higher than the Feds target rate of 5%. Currently unemployment is at 5.8% which is within the realm of the Fed’s goal. Inflation has
The recent job growth is impressive with an increase in 3.4% though the unemployment rate is still at 10% (U.S. average is 5.2%). With this recent increase, there is
My prediction is that GDP will increase steadily in the future. According to econedlink.org, a nation’s maximum or potential GDP or its potential output is the highest level of output that can be maintained over the long term, given any constraints on the nation’s productive resources. And a limit supply of labor, natural resource, service and capital will result in the limit of potential output, which means, the limit of GDP (2015, econedlink). Besides, according to our textbook, the determinants of economic growth to which we can attribute changes in growth rates include four supply factors: changes in the quantity and quality of natural resources, changes in the quantity and quality of human resources, changes in the stock of capital goods, and improvements in technology (2015, McConnell)
The health of the current U.S. economy appears to be growing gradually. The second quarter real GDP growth was 3.7% and the unemployment rate declined to 5.3%. The U.S Federal Reserve (Fed) is expected to raise interest rates in the near future when it sees clear signs of strong economic growth and improvements in the job market.
While there are expectations of a yearly gain of nearly 2.3 million net new jobs, the unemployment rate is still very high i.e. around 6.5 percent. The lower-than-expected job growth is fueled by various factors including government hiring, weather, and Obamacare. Actually, similar to December, January had a lower-than expected increase in job opportunities since only 113,000 jobs were created. However, the rate of unemployment still reduced to 6.6 percent in this month despite of the growth in labor force. The current rate of unemployment is the lowest in U.S. since the 2008 recession because more people are leaving the labor force instead of finding jobs.
Comparing financial data from statements can help determine whether or not it is a sound decision to invest in a company. This information can also help determine if a company is operating successfully and areas of risk within the company. This analyzing can help one company compare itself to another company and ensure that they are able to compete with other companies in their respective industries. PepsiCo and Coca-Cola are two major companies that make a majority of their money from producing and selling soft drinks. To compare these companies we are going to use vertical and horizontal analyses to see if these
The unemployment rate in the United States has improved dramatically over the last two years, from a high of 8.3% in July 2012, to a low of 6.6% in January 2014. In October of 2012, the civilian labor force increased from 578,000 to 155.6 million, labor force participation increased up to 63.8%, and total employment overall rose by 410,000! Since then, the unemployment rate has been falling at a stable rate due to a political push from Washington DC and new employment initiatives. The inflation rate over the last 2 years has been relatively stably, with a few major increases and decreases in 2012 and 2013. It reached a high of 2.3% in June of 2012, and reached a low of 1.0% at the end of 2013. The federal interest rate has remained at a constant .25% over the past few years.
PepsiCo and Coca-Cola are fierce competitors and according to their financial statements they are both healthy companies. Therefore I would invest in Coca-Cola if I had to make the decision because it has higher income, a stronger long-term debt to networking capital ratio, steadily rising net income per common share, and a climbing and high solvency ratio. PepsiCo still shows healthy growth and outperforms Coca-Cola in many areas. I will conduct a financial analysis of Coca-Cola and PepsiCo to identify their strengths and weaknesses, ultimately deciding which one is worth the investment.
1. What is PepsiCo’s corporate strategy? Briefly identify the business strategies that PepsiCo is using in each of its consumer business segments in 2008.
The economy continues to improve despite the last couple of years, by having an increased number of government budgets, increases number of efforts to reduce the public debt levels, and an export oriented growth
Financial analysis is the examination of pecuniary and financial information to accomplish the companies’ commitment. This investigation resolves the migration of organizations’ possessions, to explicate external and internal operations (Berman & Knight, 2012, p 38). This just says, a way to gauge an organization achieved and failed operations. In this logic, one may agrees that a financial analysis appraises businesses’ operating effectiveness, liquidity, and capital structure.
The current rate of GDP growth, according to the Bureau of Economic Analysis, is 2.7% (for Q3), and it was 1.3% in Q2 of this year. This rate reflects relatively slow growth, with challenges remaining in the domestic market and with sluggishness in Europe suppressing exports to that region. The rate of GDP growth is predicted to slow to a decline of 0.5% between Q4 2012 and Q4 2013, the US re-entering recession, according to the Congressional Budget Office's projections. These projections are based on the provisions of the Budget Control Act being enacted, though any observers are doubtful that this will occur.