Macroeconomics: Automotive Industry Goods and Services Report

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Introduction

One of the fundamental factors influencing macroeconomics is global automotive production. The importance of the automotive industry in terms of macroeconomic impact is very high, associated with incredibly high production volumes. The major auto dealers such as Toyota, Ford, and others are the most significant companies that hold the entire drive. According to recent studies, the Automotive industry, in terms of production, contributes to expanding the tax base and state budget revenues, creating new jobs, and developing auxiliary sectors, including financial and credit institutions (LaBelle & Santacreu, 2022). Thus, this industry is associated with such inflation indicators related to the formation of macroeconomic factors.

A Macroeconomic Variable that Business Executives Should Monitor

The cost of production rises in proportion to the rise or fall of inflation. Inflation primarily affects gasoline prices. When the supply cannot be satisfied, according to the laws of the market, prices in the industry rise (Bodine & Ohman, 2022). Also, this indicator is directly related to the inflation of repairs, spare parts, and insurance. According to the latest research for 2023, inflation for the above areas reaches approximately five percent (Bodine & Ohman, 2022). Another factor related to the automotive industry, which significantly affects inflation, is the lack of new car supply, which is caused by high demand and a decrease in supply (Bodine & Ohman, 2022). Thus, these inflation indicators and the automotive sector are directly related.

Based on the graph provided prior, it can be noted that inflation has increased significantly over the past 2-3 years. This is due to two reasons, one directly related to the engineering industry. Rising gasoline prices cause similar inflationary surges. It is also worth noting the severe increase in inflation associated with the pandemic, problems with logistics, and other restrictions imposed on the industry.

Conclusion

Despite attempts by some countries to lower inflation by raising interest rates, the problem will remain relevant for some time. According to the law of the existence of the market and the functioning of inflation, stabilization should occur in the near future after a sharp jump (as can be seen on the chart) (Bodine & Ohman, 2022). The industry’s behavior will directly depend on the level of inflation; prices will rise or fall depending on the cost of production and inflation rates. That is, if other factors, such as, for example, the Russian-Ukrainian conflict, affect global pricing, the automotive industry will also give a corresponding response. The main task of any company in this industry is solving problems with supplies and the energy market, which will significantly reduce inflation.

Sources

Bodine, R., & Ohman, J. (2022). . Car Insurance Comparison. Web.

LaBelle, J., & Santacreu, A (2022). . Federal Reserve Bank of St. Louis review, 1, 1–14. Web.

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IvyPanda. 2024. "Macroeconomics: Automotive Industry Goods and Services." February 27, 2024. https://ivypanda.com/essays/macroeconomics-automotive-industry-goods-and-services/.

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IvyPanda. "Macroeconomics: Automotive Industry Goods and Services." February 27, 2024. https://ivypanda.com/essays/macroeconomics-automotive-industry-goods-and-services/.

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