Market Conditions: Two Key Indicators
Economic Growth (GDP): The level of demand in most markets is influenced by the rate of economic growth. Economies vary in terms of their “normal” long-term growth rate. A mature economy like the UK has a long-term growth rate around 2-3%. It shouldn’t be too high, or too low. GDP growth will vary depending on the state of the economic cycle.
GDP = Gross Domestic Product
The value of goods and services produced by an economy over a specific period.
GDP:
- measure of the value of activity of economy
- value used to assess changes in economic growth
Demand:
- how much of a good or service a consumer wants—and is able to pay for
- for a business, demand turns into revenues (sales)
GDP is measured in quarters, so 4 sections per year of 3 month units. 2 consecutive quarters of negative growth is a recession.
Interest Rates—An interest rate is the reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed.
So, when interest rates are high, saving is more attractive and taking out loans or mortgages are less so.