Efficient Company Management Places Important

Efficient company management places important value on adjusting business strategy to align with global and national economic trends and to take advantage of them. This is done by examining economic forecasts prepared by professional institutions. The Federal Reserve Board releases annual forecasts and explains the economic trends and underlying fundamentals. Overall, in 2004 USA economy has persisted the solid growth and moderate inflation rate, with real GDP growth accounting to 3,75% in 2004 and 4,5% in 2003, the average annual growth up to 2008 is expected to remain at the level of 3,3%. The economy was supported by increasing household and business spending which may lead to increasing demand for consumer goods and specific intermediate inputs. The unemployment rate has declined to 5,25%, which is the lowest rate since 2001. In 2006 the unemployment may drop to 5,1% and remain at that level for the next several years to come. Consumer price inflation was driven by sharp increases in oil prices and consumer price index rose at about 2%, and real personal disposable income rose by 4%. For the year of 2005, the expected CPI is 2,0%, in 2006 2,3% and 2,4% in 2007. Nominal mortgage interest rate remain at their lowest level since 1960s and fluctuate between 5,5% and 6,25%. This supports the demand for housing which in turns stimulates construction initiation. Thus, in 2004 1,6 millions of single-family housing units were initiated comparing with 1,5 in 2003. For the multi-family housing in 2004 this number accounts to 350,000 units.

The activities have been speeding up within business investments as well, thus, the investment in equipment and software increased by 13,5% in 2004 as the sales continued to increase and profits to grow. Most interest rates rose, particularly on securities with short maturities periods. In yearly 2005 short-term and intermediate-term Treasury yields rose along with expectations for the path of monetary policy, but longer-term yields edged lower. Yields on investment- and speculative-grade corporate bonds largely moved with those on comparable Treasury securities, and hence risk spreads remained at low levels. In the coming years, the 10-year Treasury bills are expected to yield 4,6% in 2005, 5,2% in 2006 and 5,4% in 2007.

Another professional institution, Mortgage Bankers' Association has plotted another numbers for the perspective economic development. They expect the real GDP to grow at 3,8% in 2005, 3,3% in 2006 and 3,5% in 2007. Consumer prices are probable to grow at 2,8% in 2005, 2,7% in 2006 and 3,2% in 2007. The unemployment rate is supposed to stay stable and be estimated as 5,2% in 2005, 5,1% in 2006 and stay the same in 2007, thus signaling that there will be no improvement in the employment situation in the country. As for the interest rate, the return on Treasure Bills with ten years to maturity is forecasted to be at the level of 4,7% in 2005, 5,3% in 2006 and 5,6% in 2007, thus to be growing. The housing starting is projected not to grow by the Mortgage Bakers' Association, and is forecasted at 1,958 millions units in 2005, 1,758 in 2006 and 1,730 in 2007. This forecast may be biased because of the wish to signal the tightening supply in the property market to the consumers and thus stimulate the demand for property which will lead to the increases in the real estate prices. This will give opportunity to the members of mortgage association to make profits. Another tendency which may be forecasted by them in their favor, is the growing interest rates on Treasury bills to 4,6% in 2005 and 5,2% in 2006. The projected fixed 30-year fixed mortgage interest rate is assumed to grow to 6,2% in 2005, 6,9% in 2006 and 7,3% in 2007.