Economic Recovery
Economic recovery is the phase of the business cycle that follows a recession or depression, during which economic activity begins to expand again. Recovery is marked by rising output, employment, and incomes, and by the return of business and consumer confidence.[1]
Definition
Economic recovery is the upward phase of the business cycle that follows a trough. It is characterised by a resumption of growth in gross domestic product, a fall in unemployment, and a revival of investment and consumption.[1]
Characteristics
| Indicator | Movement during recovery |
|---|---|
| GDP | Rising. |
| Unemployment | Falling, though often with a lag. |
| Consumer spending | Increasing. |
| Business investment | Rising. |
| Confidence | Improving. |
Drivers
Recovery may be driven by a combination of factors, including:
- Expansionary fiscal policy, such as tax cuts and public spending.
- Monetary policy easing and lower interest rates.
- The natural rebuilding of inventories and replacement of capital.
- The restoration of confidence and the return of credit availability.
- External demand for exports.
Policy considerations
A key challenge during recovery is ensuring that the recovery is self-sustaining rather than dependent on continued stimulus. Policymakers must judge when to withdraw support without derailing the recovery—a difficult balance that has been central to debates in macroeconomics since the global financial crisis of 2008.[1]