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Economic Indices used to Forecast Sales in the Power Tools Industry

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There are four direct general economic indices that are used to forecast the sales of the PEPT (Portable Electric Power Tools) Industry in which Able Corporation operates. These are housing starts, expenditures for residential construction, expenditures for commercial construction, and expenditures for home repairs and improvement. (Underlying these indices are more fundamental factors such interest rates, inflation rates, and foreign exchange rates.) The direct general economic factors can be counter-cyclical to each other, as when residential construction expenditures are down due to high interest rates, while home repairs and improvement expenditures are up as homeowners opt to improve their current dwellings rather than build new ones. The short and long-term forecasts for these indices can often vary significantly amongst the various forecast services

In Phase 1, the emphasis was primarily, though not exclusively, introspective. At this juncture, it is necessary to understand the external environment under which Able operates and the nature of its competition. In order to properly identify Able's potential, frame its mission statement, execute its value proposition, and set achievable strategic objectives, it is necessary to perform a rigorous analysis of available information resources. These include annual reports of the competitors, channel/distributor studies, predictions of economic forecast services, and industry reports.

Research the key general economic indices affecting the power tool market and list any available projections. If significant differences exist between the various forecast services, highlight them. Obtain and list the historical actuals for the past 5 years.

How does this information affect the power tool market?
Considering that forecasting services and other information agencies often differ in their prediction of the future state of the power tools industry and vital economic factors, how would you go about putting a forecast together given these disparities?

1. List the four economic indices and explain what they are?
2. Elaborate on how they affect the PEPT industry and Able Corporation in particular?
3. If significant differences exist between the various forecast services, highlight them.
4. Give an example of a company that used this information - from experience or from research and the results.

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Solution Preview

I have integrated tables and excel charts to examine the five year data on expenditures. I placed a section on the monetary policy to help explain the underlying issues: interest rates, inflation and exchange ...

Solution Summary

The solution examines the four economic indices used to forecast sales in the power tools industry. It includes an in-depth explanation of the four economic indices, their effects, the differences and an example of a company that uses this information. This solution is provided in an attached Word document.