The trough phase of the business cycle is the lowest point of economic activity before things start to get better.

This phase usually follows a time when the economy is shrinking, which means there’s less money being spent by people and businesses.

Here are some important points to understand about the trough:

1. What Happens During the Trough:

   • Economic Slowdown: During the trough, the economy takes a big hit. For example, in the U.S. during the COVID-19 pandemic, the economy shrank by about 31.4% in the second quarter of 2020.
   • Job Losses: Many people lose their jobs at this stage. In April 2020, the unemployment rate in the U.S. reached around 14.7%, showing how hard different industries were hit.
   • Business Closures: A lot of businesses may have to shut down because people aren’t buying as much. This can hurt the economy even more.

2. Why the Trough Matters:

   • Starting Point for Recovery: The trough is like a starting line for recovery. It shows that the economy has hit rock bottom and will start to improve.
   • Government Help: During this phase, governments and central banks often step in with money strategies to help the economy grow again. For example, after the 2008 financial crisis, many countries, including the U.S., rolled out plans to give around $800 billion in stimulus money.
   • Chance for Investors: The trough can be a good time for investors to buy assets that are worth less than they should be, hoping they will increase in value later.

3. What Comes Next:

   • As the economy begins to get better after the trough, signs like more people feeling confident about spending and increased production help signal that we are moving into a growth phase.

Understanding the trough is important for seeing how the economy is changing and figuring out what actions to take during these times.