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The automotive industry involves the manufacturing of vehicles and parts for commercial and individual purposes. As the economy rebounded after 2010, consumer sentiment rose – and interest rates at historically low levels combined with extra incentives increased demand. Prospects ahead are encouraging for the industry, and profit is expected to trend upward over the next five years as industry operators benefit from rising vehicle sales and the cost-cutting measures enacted during the downturn.
Generally, automakers are focusing on the production of smaller, lighter and more fuel-efficient vehicles to become more competitive in the wake of rising regulations and volatile fuel prices. Shifting consumer preferences, along with a general recovery in the demand for vehicles, is expected to lift industry revenue over the next five years. Additionally, re-shoring activity is anticipated to become prominent as more flexible labor agreements encourage industry operators to expand domestically.
The construction industry has strongly rebounded over recent years. Tight credit markets, lower consumer spending and high unemployment slowed growth until recently as demand for new commercial and residential space has been low.
Commercial construction typically lags behind the overall economy by one to two years due to the length of contracts. As economic activity has increased, contractors’ backlogs have filled and demand for new construction has picked up. As a result, many construction outfits are now able to raise prices – slowly leading to increasing profit margins.
Road and highway construction is also expected to increase due to the need to repair, expand and rebuild existing infrastructure. Together with growing congestion caused by urban sprawl, these factors will force authorities to spend. Demand is expected to remain strong over the coming years in all areas as a result of decreasing office vacancy rates, increased infrastructure spending and greater new home starts.
The oil and gas industry has been challenged by recent declines in oil prices, which are now expected to be sustained for some time. New technologies and extraction techniques, however, are enabling a quick recovery from the negative shock of low prices. Domestic production of oil and gas has steadily increased, and industry operators have positioned themselves to perform strongly in the future.
The industry includes a few extremely large globalized companies that typically engage in all steps of the production process – everything from exploration to refining. These large companies received the majority of the benefits from the emergence of hydraulic fracturing and horizontal drilling techniques. As operators deplete their reserves, it becomes increasingly necessary to improve efficiency and minimize waste. Nonetheless, the number of industry operators is expected to increase, as previously uneconomical resources have become accessible.
The finance and banking industries serve to facilitate personal and corporate investment and financing activities.
Commercial banks are experiencing low revenues due to historically low interest rates. Furthermore, non-interest income remains volatile due to weakness in private business start-ups and expansions, as well as a sluggish residential real estate economy. One bright aspect has been mortgage refinancing, which has seen robust activity as people move out of higher interest mortgages. The industry is experiencing significant consolidation recently, and the robust performance of capital markets over the past several years has also boosted profit margins. In addition, the number of credit-worthy borrows has increased.
Looking to the future, government regulation and technology-driven competition are expected to dramatically change the business model that commercial banks use. Revenue will become less volatile, and big banks will grow deposits at a faster rate than smaller savings institutions since their reputations were damaged due to the significant number of bank failures that occurred during the economic downturn.
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