6.1.2—Economic

Growth, inflation, unemployment, interest rates, exchange rates and income affect customers, suppliers and financing. The direction and size of the effect depend on the business and market.

A rate rise may reduce borrowing and discretionary spending but benefit savers; inflation can raise costs while allowing price increases only if customers accept them.

An export firm may gain from a favourable exchange rate but face higher imported input costs, so “economic conditions” need a specific transmission mechanism.

An economy-wide indicator is not a business forecast; segment, contract and timing determine exposure.