What does a peak in the business cycle indicate?

A peak in the business cycle signifies the point at which economic activity reaches its highest level before experiencing a downturn. This is characterized by maximum output and employment, indicating that the economy is performing at its fullest capacity. During this phase, businesses invest heavily, consumer spending is robust, and unemployment typically is low because most available jobs are filled.

As the peak is reached, various economic indicators such as GDP growth may show signs of slowing down, suggesting a transition into the contraction phase. However, the defining characteristic of the peak itself is that it represents the culmination of economic growth, not the beginning of a decline. Understanding this concept is crucial for analyzing economic trends and making informed investment decisions.