What does a trough indicate?

A trough in the business cycle represents the lowest point of economic activity before a recovery begins. It indicates that the Gross Domestic Product (GDP) has stopped declining and is poised for an increase. At this stage, the economy typically experiences a turnaround after a period of contraction where economic activity has been at its lowest.

Recognizing this stage is crucial because it signals to businesses, consumers, and policymakers that recovery is on the horizon, paving the way for new investments, increased consumer spending, and overall economic growth. Understanding the trough allows economists and analysts to predict shifts in the economy and make informed decisions about future economic activities.