What phase of the business cycle is the US in?

In this, the U.S. economy appears to be in its characteristic mid-cycle phase of the business cycle, generally identified by rising corporate profits, growing demand for credit, declining cost pressures, and neutrality in monetary policy settings. Recent analyses argue that it actually moved from the late to a mid-cycle phase without being sucked into recession.

Consistent with this observation, U.S. small business sentiment has climbed to a three-and-half-year high. The National Federation of Independent Business said its Small Business Optimism Index jumped by the most in eight months, reflecting increased expectations for economic improvement and expansion.

Besides, the U.S. economy showed strong growth in the third quarter of 2024, with GDP increasing by 2.8%. This was contrary to the earlier expectations of a recession, indicating a soft landing with high interest rates. Consumer confidence is rebounding, the labor market is still stable, and inflation has gone back to pre-pandemic levels.

The business cycle, therefore, has four phases: expansion, peak, contraction, and trough. Mid-cycle would mark the phase of the cycle between early expansion and the late cycle. In this phase, economic activity shows growth, though at relatively more modest paces than those during an early expansion.

Current economic indicators and analyses propose that, as of December 2024, the U.S. economy is in the mid-cycle phase of the business cycle. During this phase, the economy sustains its growth, accompanied by improved business confidence and stable monetary policy, indicative of a good environment in which expansion may continue.

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