What does the economic factor in a PEST analysis typically assess?

The economic factor in a PEST analysis focuses on assessing various aspects of the economy that can influence an organization’s performance. This includes important market trends such as inflation rates, employment levels, interest rates, economic growth, and overall economic stability. By evaluating these economic factors, organizations can understand how shifts in the economic environment might affect consumer purchasing power, demand for products or services, and ultimately their profitability. This analysis is crucial for strategic planning, as it helps businesses to adapt to changing economic conditions and to position themselves effectively in the market.

Customer demographics and preferences relate more to the social factor, regulatory changes to the political factor, and technological advancements to the technological factor in PEST analysis. Thus, these other factors, while important to consider in a broader strategy, do not fall under the scope of economic factors like inflation and employment rates do.