Macroeconomics Abbott Labs and Macroeconomics it Is

Macroeconomics Abbott Labs and Macroeconomics It is a fact that the recent economic downturn affected every individual and company in some way, but companies that had solid business plans prior to the start of the crisis were better able to weather the financial storm. For example, a company that had a diverse range of business that included both products that depended the level of a consumer's disposable income and another group of products that are indispensable would probably be able to meet its financial goals despite global economic issues.

Such a company is Abbott Laboratories. Because the primary business of Abbott is producing medical devices, pharmaceuticals and tests that are widely considered standards in the medical community (Abbott Laboratories, 2012), the company has been able to maintain its profitability throughout the economic crisis. However, macroeconomic indicators do have an effect on the continued economic viability of the company and they can provide investors with a monthly picture of how Abbott is faring.

For this report, gross domestic product (GDP), the consumer confidence index (CCI), and the personal consumption report (PCR) will be used as indicators to explore the Abbott Laboratories. GDP is the indicator that is most often used to determine "the market value of all goods and services produced by the economy during the period measured" (Barnes, 2012). To a large company such as Abbott Laboratories this indicator has a great deal to do with the profit projections that they will make for the coming year and into the deeper future.

Abbott laboratories is comprised of a great many different products that depend on the health of the economy to make them profitable. Because the economic outlook for the country is reflected in its GDP, Abbot can use that data to determine what portions of its business to highlight. Pharmaceuticals may not sell as well if the overall GDP decreases, but they may do more business in health services.

It would seem that the health services industry is largely exempt from the price fluctuations that affect other industries because people always need healthcare, but this is not always the case. People are more likely to limit their use of healthcare services if they perceive that the economy is performing badly, and they are much less likely to use pet care and peripheral care products if they have lost confidence in their spending power (Roehrig, Turner, Hughes-Cromwick, & Miller, 2012).

The CCI looks at the confidence of the buying public over a certain period and uses three measures to make the determination: how people feel currently, how people feel the general economy is going, and how people feel the economy will be faring in six months' time (Barnes, 2012).

In Abbott's case, this can be a guide for release of a new product, the implementation of a new service, or general gauge to see whether people are going to want to use their services and to what extent in the near future. Consumer confidence can actually be good for Abbott whether it is high or low.

Since people are more apt to use some healthcare services when they are upset and other when they feel that they have the money for them, Abbott has both ends of the spectrum covered with its wide range of products. Another measure that the company can use is called either the Personal Income and Outlays Report or the Personal Consumption Report (PCR).

Personal income fluctuates a great deal over the course of a given time period (in this case a month) based on employment and how well individual investments are doing during the time period. Outlays take into account both purchases and monthly expenditures (Barnes, 2012). This report details real personal income, disposable personal income and the personal savings rate (Barnes, 2012). If personal and disposable income are trending upward, people are more likely to consume goods and services. The opposite happens if the trend is downward.

Although Abbott is a healthcare industry, the company is still affected by the vagaries of the shifting economy. Much like the confidence indexes, the PCR gives the company a picture of how willing people will be to spend money in the coming weeks and months. Another issue is the Federal Reserve and how it can effect business. The Federal Reserve basically controls one interest rate, but it seems that the rest of the country follows what the Fed does.

If the interest rate is higher, then it costs more to borrow money. For a company as large as Abbott, this could be rather significant because they will, at times, have to borrow a great deal of money to finance a project. If the cost of money increases, the company's profit margin decreases, sales could decease because the company may have to raise the amount the customer has to pay and it narrows the types of financing that the company.