Stage Guide

Learn about each stage of the U.S. business cycle and the key indicators that define them. Our AI-powered guide helps you understand economic trends and their implications.

The 6 Stages of the Economic Cycle

Economic activity moves in recurring patterns. Analysts often describe these movements in six broad stages, each with unique features.

Stage 1 – Early Recovery

The economy starts to rebound after a slowdown.
Inflation is low or declining.
Interest rates are often supportive.
Output and demand begin to grow, though cautiously.

Stage 2 – Early Expansion

Growth picks up steadily.
Employment begins to rise, and consumer spending improves.
Business investment starts to recover.
Inflation remains contained at low to moderate levels.

Stage 3 – Expansion

Growth is solid and broad-based across sectors.
Labor markets are strong with low unemployment.
Services and manufacturing both contribute to activity.
Inflation is moderate and manageable.

Stage 4 – Late Expansion

Economic activity is at or near peak capacity.
Inflation pressures increase.
Central banks may raise interest rates.
Asset prices are strong but volatility can rise.

Stage 5 – Slowdown

Growth begins to lose momentum.
Business and consumer confidence weaken.
Employment growth slows.
Inflation may remain high for a time, even as output cools.

Stage 6 – Contraction

Output declines across key sectors.
Unemployment rises.
Demand weakens significantly.
Inflation falls or turns into deflation.
Policy measures are often introduced to stabilize activity.

Note: This guide is for research and educational purposes only. It describes common stages of the economic cycle and does not constitute financial advice.