Expansion is the phase of the business cycle where the GDP of a country grows for two or more consecutive quarters – Moving from a trough to a peak. On average, it lasts for between 4 and 5 years.
Expansion is characterized by a rise in employment, increased consumer confidence, and stock markets. Money is cheap to borrow, businesses build up inventory and customers increase their spending.
The expansion phase can be identified through low interest rates, the increased average number of weekly hours worked by manufacturing employees, and a low level of unemployment claims.
Companies that perform well in the expansion phase include basic industry stocks (i.e. chemicals, paper, steel) and cyclical consumer stocks (general retailers, airlines, leisure, automobiles).
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