Expansion
The phase of the business cycle in which output, employment and incomes are rising.
How it is identified
Test: real GDP, employment and industrial production are rising on a sustained basis from a prior trough
Unit
qualitative
In depth
Expansions are typically much longer than contractions — historically years rather than quarters — which is why the long-run trend of an economy and its equity market is upward despite periodic falls. Late in an expansion, capacity utilisation rises, wages pick up and inflation follows, which eventually brings monetary tightening and ends the phase. Cyclical sectors such as metals, autos and construction typically perform best in the early and middle stages. Nothing here suggests that identifying an expansion tells anyone what markets will do, since markets price expectations rather than current conditions.
Worked example
Capacity utilisation rising from 71% to 78% over two years indicates an expansion maturing. Firms begin new capital expenditure at those levels, which is what turns the investment cycle.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Expansion” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.