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What is a Market Growth Rate?

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  • Written By: Jason C. Chavis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 06 November 2016
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Market growth rate refers to the pace by which any given market increases or decreases in value. This can be used to reference either a single part of an economy or the larger economy as a whole. Companies, financial institutes, and governments use this measurement to determine the successes or failures of current sales or gross domestic product performance. When the rate increases, it is said to be a positive development, while a decrease is associated with negative growth. On a national or global level, a steady and significant decrease can become a recession and ultimately a depression.

Companies track market growth rate in an effort to decide the best direction of the business's operations. It can be measured most accurately on a monthly or yearly rate. The firms analyze the health of the company through numbers for an annual increase in product sales as well as market share. Ultimately, the company wants to control as much of the industry in which it operates as possible. This helps it determine where to go with a marketing campaign and if the product or service is being fully saturated to its potential.

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Financial institutes use the concept to determine what the future prospects of a particular business model or industry may be. This helps them to find the correct investments in order to make adjustments to portfolios. In regards to investment, growth rate is controlled in the financial sector using concepts like derivatives, options and futures. By enabling investors to hedge against positive and negative changes in the market, it prevents major losses to this sector. The firms generally use rate information to establish collections of these products that consumers can purchase for investments.

Market growth rate has a larger implication in regards to national of global economies. Measurements to determine these factors include gross domestic product, exchange rates and purchasing power parity. Gross domestic product is the nation's overall output, exchange rates are the differences between the value of money in various markets and purchasing power parity is the standard of living in different countries. These figures are an important indication of the economic well-being of a nation or region. Governments want the growth rate to constantly increase in order to maintain economic viability of the country as population grows.

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