The economic cycle generally consists of four stages: recovery, prosperity, recession and depression. At the beginning of the recovery phase, it was the lowest point of the last cycle, and both output and price were at the lowest level. With the recovery of economy, the recovery of production and the growth of demand, prices have also begun to pick up gradually. The boom stage is the peak stage of the economic cycle. Because the continuous expansion of investment demand and consumer demand exceeds the growth of output, the stimulus price rises rapidly to a higher level. The recession stage appeared after the peak of the economic cycle, and the economy began to decline. Due to shrinking demand, supply greatly exceeded demand, and prices fell rapidly. Depression is the bottom of the economic cycle. Both supply and demand are at a low level, and prices have stopped falling and are at a low level. During the evolution of the whole economic cycle, the price fluctuation lags behind the economic fluctuation slightly. These are the general characteristics of the four stages of the economic cycle.
For example, before the 1960s, the economic cycle in western countries was characterized by large fluctuations in output and prices in the same direction. In the early 1970s, western countries entered the so-called stagflation period. The economy has fallen sharply, but prices are still rising sharply, and economic stagnation and serious inflation coexist. However, since the 1980s and 1990s, the economic fluctuation has been greatly reduced, and the overall price level has only risen but not fallen. In recession and depression, it is only the rate of price increase, not the absolute price level. Of course, this kind of only rising but not falling refers to the general price level rather than the prices of all specific commodities, which are still rising and falling. After entering the mid-1990s, some emerging market economies, such as South Korea and Southeast Asian countries, were hit by the financial crisis, which led to a sharp drop in the international market prices of some commodities. However, the global economy has not fallen into a full-scale crisis, and the economies of European and American countries have continued to improve. Therefore, careful observation and analysis of the stages and characteristics of the economic cycle is of great significance for correctly grasping the price trend of the futures market.
The stage of economic cycle can be judged by some main economic indicators, such as GDP growth rate, unemployment rate, price index, exchange rate and so on. These are all things that futures traders should pay close attention to.