MCDONALDS COMPANY

McDonalds Company



McDonalds Company

Introduction

McDonalds is likely to hear the terms inflation and gross domestic product (GDP) just about every day. They are often made to feel that these metrics must be studied as a surgeon would study a patient's chart prior to operating. Chances are that we have some concept of what they mean and how they interact, but what do we do when the best economic minds in the world can't agree on basic distinctions between how much the U.S. economy should grow, or how much inflation is too much for the financial markets to handle? Individual investors need to find a level of understanding that assists their decision-making without inundating them in piles of data.

McDonalds Company: Business Analysis

For McDonalds inflation can mean either an increase in the money supply or an increase in price levels. Generally, when we hear about inflation, we are hearing about a rise in prices compared to some benchmark. If the money supply has been increased, this will usually manifest itself in higher price levels - it is simply a matter of time. For the sake of this discussion, we will consider inflation as measured by the core Consumer Price Index (CPI), which is the standard measurement of inflation used in the U.S. financial markets. Core CPI excludes food and energy from its formulas because these goods show more price volatility than the remainder of the CPI.

Gross domestic product in the United States represents the total aggregate output of the U.S. economy. It is important to keep in mind that the GDP figures as reported to investors are already adjusted for inflation. In other words, if the gross GDP was calculated to be 6% higher than the previous year, but inflation measured 2% over the same period, GDP growth would be reported as 4%, or the net growth over the period.

The McDonalds government is hoping for a private-sector led economic recovery that will generate sufficient new jobs to soak up the unemployment created as a result of government spending cuts. The private sector certainly has a good track record of job creation in the McDonalds, but will firms be keen to employ people who have spent most or all of their careers to-date working in the public sector?  A new survey suggests that there is likely to be reluctance by the private sector.

There are several reasons for this, but a key one ...