As the case was written focusing on changes made by Gap Inc going into fiscal year 2005, Case analysis and evaluation will be based on the company’s general environment in 2005 and will be primarily focused on the United States, due mainly to the fact that the majority if Gap Inc sales are within the US.
The United States Economy
In mid 2004 to 2005, the US economy was considered to be in a state of recovery that beset the market during the 2001 recession, which stopped or reversed many of the positive economic trends that took place in the late 1990s. Through the late 90s, real wages grew rapidly for all workers (high-wage to low-wage), poverty rates were falling, and growth of income inequality was significantly slowed down.
In the years 2004 and 2005, unemployment was high in contrast to years preceding the 2001 economic recession, however unemployment was falling due to consistent job creation that started in 2003. In mid 2004 the rate was 5.6%, standing at the exact same rate in November 2001, when economic recovery began. On the brighter side, the United States Government has consistently collected statistic data pertaining to the national unemployment rate since 1939, and historical data shows that never has it taken long for the US job market to recover.
The Consumer Price Index (CPI) measures the average prices that American households pay for consumer goods and services. Changes in CPI help measure inflation. Change in CPI and inflation for 2005 was higher than previous years, indicating a greater change in the increase in prices for consumer goods than the increase in money in the economy. (Please see appendix 1)
The United States average Consumer Confidence Index calculation for 2005 was higher than previous years; incidentally, personal saving rates were lower than previous years. This is an indication that in 2005 the average American gained confidence with regard to the outlook of the US economy, and that they...