Lesson 7 of 7 · All lessons in this module
- What a business cycle is: classical, growth and growth rate cycles
- The four phases, recessions and market behaviourVideo lesson
- Credit cycles
- Labour, capital spending, inventories, consumers and housing
- Leading, coincident and lagging indicatorsVideo lesson
- Surveys, big data, nowcasting and diffusion indexes
- Integrated cases: reading the cycle from a data panel
Lesson 7 of 7 · 15 min
Integrated cases: reading the cycle from a data panel
A cycle case gives you a panel of indicators, a labour table and a few numbers, and asks you to sort, count, name the phase and explain the lags without mixing up the turning-point language.
In short
- Sort every indicator into leading, coincident or lagging before you interpret anything. Then count the direction of each group separately.
- Leading signals say where the economy is going, coincident ones where it is now, lagging ones confirm where it has been. Disagreement is resolved by timing.
- 'Peak' in an exam stem means the slowdown phase: inflation still accelerating, firms borrowing to expand capacity, hiring slowing; 'trough' means recovery.
- The unemployment rate lags for two reasons: firms hire and fire slowly, and in a recovery new and returning job seekers enter the labour force, so the rate can rise even as employment grows.
- A diffusion index counts how many components move with the index: score 1, 0.5 or 0 by the threshold, average, multiply by 100.
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