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What is a Business Cycle?

What is a Business Cycle?

Business cycles consist of alternating periods of expansion and contraction in the level of economic activity experienced by market-oriented economies.

  • Business cycles are a type of fluctuation in aggregate economic activity in market-oriented economies.
  • They consist of simultaneous expansions in many economic activities, followed by similarly general recessions.
  • This sequence of changes is recurrent but not periodic –a business cycle can last from a year to more than a decade.
  • A business cycle cannot be divided into shorter cycles of similar character and magnitude.

Growth rate cycles – alternating periods of accelerating and decelerating economic growth – occur within business cycles. Growth rate cycle downturns can culminate in either recessions or soft landings that are followed by a reacceleration in economic growth. These cycles are especially relevant to cyclical fluctuations in securities markets.

Inflation cycles consist of alternating periods of rising and falling inflation. Inflation cycle downturns have a degree of correspondence with economic slowdowns, but sometimes begin before, rather than after, the start of a slowdown.

The Durability of the Cycle

During long periods of economic expansion, conviction inevitably grows that the business cycle is “obsolete,” because the economy has entered a “new era.”

Download and read “Business Cycle's Demise Greatly Exaggerated”.

For this reason, the robustness and objectivity of ECRI's analytical framework is essential to any informed decision-making process. The reality is that, as long as we have free-market economies and human nature is prone to bouts of greed and fear, the business cycle will endure.

ECRI History

ECRI History

Three generations of cycle research.

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ECRI continues to be an important resource in determining our tactical allocation. For over a decade their economic cycle forecasts and detailed research topics have been a critical part of our decision making process.
- ECRI Client
For ourselves, in this cycle, we'll line up with ECRI.
- Grant's Interest Rate Observer
I have to pay attention to those people and indicators that have pointed in the right direction - even when they've gone against the crowd (and my opinion at the time). One such outfit is the Economic Cycle Research Institute, whose various leading indicators actually have done just that - lead where things were headed.
- Randall Forsyth, Barron's
Over the last 15 years, [ECRI] has gotten all of its recession calls right, while issuing no false alarms. Oct. 2011
- The New York Times
(ECRI's) forecast of the [Great] recession helped us anticipate reduced merchandise sales; we proactively revised our inventory forecasts down months ago, and that has helped to greatly minimize the inventory swell and need for markdowns.
- Fortune 100 Company
Your work stands alone in the industry. I wholeheartedly value and endorse your service!
- ECRI Client
           

Our Track Record

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Highlights of ECRI's calls.

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