Economic cycle


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Economic Cycle

The period of time during which an economy evolves from a state of health to fragility to recession to recovery and back to health. Every capitalist economy has cycles to a greater or lesser extent. However, regulations may be designed to curtail them (or, more accurately, to attempt to maximize the good times while preventing the bad times); this is rarely successful. Factors affecting economic cycles include the level of inflation, the availability of capital, natural disasters, and political events. Some industries are considered countercyclical, meaning that demand for their products remains relatively constant regardless of economic circumstances; some even do better in recessions. Other industries, mainly those considered luxuries, are greatly dependent on economic cycles. An economic cycle is often colloquially called a boom-and-bust cycle.

Economic cycle.

An economic cycle is a period during which a country's economy moves from strength to weakness and back to strength.

This pattern repeats itself regularly, though not on a fixed schedule. The length of the cycle isn't predictable either and may be measured in months or in years.

The cycle is driven by many forces -- including inflation, the money supply, domestic and international politics, and natural events.

In developed countries, the central bank uses its power to influence interest rates and the money supply to prevent dramatic peaks and deep troughs, smoothing the cycle's highs and lows.

This up and down pattern influences all aspects of economic life, including the financial markets. Certain investments or categories of investment that thrive in one phase of the cycle may lose value in another. As a result, in evaluating an investment, you may want to look at how it has fared through a full economic cycle.

References in periodicals archive ?
The Treasury said "It remains too soon to assess whether the second half of 2006 marks the end of the economic cycle that is judged to have started in the first half of 1997.
The expansionary phase of the 13th postwar economic cycle lasted just 22 months, the shortest since the end of World War II, the Cabinet Office said after Cabinet office officials met with a study group assigned by the government to research economic-related indexes.
The Treasury now judges that the current economic cycle started in 1997 - two years earlier than previously thought.
Economists had warned that Mr Brown was about to break his "golden rule" of only borrowing to invest over the current economic cycle, but the change to the start date should ensure he will not do so.
As John McKean so eloquently states, marrying data driven analytics with consumer insight is critical for managing through tough economic cycles.
today announced the introduction of the "Basic Four Economic Cycle Indices," which are four indices that allow investors to observe and to take advantage of return and risk opportunities at different phases of the economic cycle.
Moreover, since all markets have varying economic cycles, we wanted to establish our firm in several different industries to stay consistently active.
It is noted that annual growth increases year-on-year until 2007, at which point revenues will crest, in conjunction with market maturity and a likely shift in the economic cycle.
As 2004 illustrated, the strength and, just as important, the balance of our businesses enables us to generate strong earnings and cash flow in nearly all stages of the economic cycle," said Bunch, who will become chairman and CEO July 1, as announced last month.
BG's capital position has been a key strength during the past few years, and was a critical factor in BG's ability to absorb the tax settlement at a weak point in the economic cycle without business disruption.
We think the slowing of growth forecast by the Economic Cycle Research Institute Weekly Leading Index might be revealing one last substantial setback by the markets early next year.
In general, the markets in which our major business units operate are in expansive phases of the economic cycle and we foresee this continuing for the remainder of the present financial year.

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