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The business cycle goes through 4 phases:
Economic expansion: RGDP is increasing
Economic Contraction: RGDP is declining
Peak: The economy reverses from expansion to contraction
Trough: The economy reverses from contraction to expansion
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Economic Recession: When the economy is in a downturn for at least six months. Growth rate is negative, unemployment increases, and price level is most likely to rise.
Economic Depression: A prolonged recession declared when the unemployment rate is 12% or more.
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Leading Economic Indicators
- Average workweek for manufacturing sector
- A longer workweek is better
- Average weekly unemployment insurance claim
- A lower value is better
- New orders for consumer good
- A high value is a good sign
- Index of consumer confidence
- A high value is a good thing
- New orders for non-defense durable goods
- Good times ahead with a higher value
- Number of new building permits issued for private housing units
- A high value is good
- Stock Prices
- If they go up, then companies are doing well
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