Econ Grapher

Recovery (Economic Recovery)

What is an economic Recovery?
An economic recovery is a part of the economic or business cycle. The recovery phase is where the economy starts to pick-up and start growing again, and precedes periods of economic growth and boom. The business cycle generally goes from economic boom (high growth) to slump (low or no growth), recession (negative growth), and in the worst case scenario - depression or stagnation, and of course then there is recovery. Economic recovery usually sets in as a result of fiscal or monetary policy stimulus (as an artificial jump-start), the inventory cycle (which is essentially an over-reaction to the recession and then unwinding of that over-reaction), and an eventual turnaround of spending and activity. When the economy is in recession it is important to watch carefully for signs of recovery or persistence of the recession. 

How does it relate to Markets?
An economic recovery is an important event for financial markets, given the impact that the economy has on the prospects of investments and valuations. Of course the stock market will price in the recovery in advance, so it is important to watch for signs of the recovery through leading indicators such as various parts of the PMI, confidence indexes, leading index composites, etc. Thus also any faltering of the economic recovery will also be important to note, because 'double-dip' recessions can take the wind right out of a stock market recovery.

Sources and further reading:
Investor Words - Recovery
Russell Investments - Economic Recovery Dashboard
President's Economic Recovery Advisory Board

Graph Library:
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Original Source: http://www.econgrapher.com/encyclopedia-recovery.html

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