the economic condition was characterized as follows: no decrease in productivity in 6 years; labor costs had increased at a low rate; capital investment had increased more than 13.6% annually since 1970; tariff barriers were lowered; and the Canadian dollar had a favorable exchange rate. During 1998 the economic condition exemplified the following: low inflation rate; fiscal surplus; a declining, although still high, public debt to GDP ratio; and the institution of NAFTA, that allowed for free trade among Canada, the US and Mexico. Furthermore, the Canadian dollar had depreciated 13% against the US dollar. Two factors are attributable to this depreciation. One is the fluctuation in the exchange rate and the use of the US dollar as a benchmark. Two, commodity prices were hit hard by the consequences surrounding the Asian crisis, which consisted of financial troubles and economic instability. The US dollar prices of commodities that are imported to Canada had decreased over the previous twelve months by 15%. Commodities make up about 30-35% of Canadian merchandise exports.
In addition, recessions and booms also play a big role in the supply and demand of products. During a boom the economy is expanding, a lot of construction is in progress, and unemployment is low. Low unemployment ultimately leads to high disposable income which in turn increases demand. This is readily apparent in the recreational products industry (Snowmobiles, Water Craft Vehicles, All Terrain Vehicles). An economic boom or recession would also have a profound impact on the construction industry’s Utility Vehicles, which also experience an increase in demand and production during an economic boom. For example, during the recent 2000/2001 economic boom Bombardier experienced a 6% increase in demand for its Utility Vehicles.
Interest Rate Fluctuations are a key economic factor with regard to organizations that operate in the global economy. For ex...