What defines the late upswing phase of the business cycle?

The late upswing phase of the business cycle is characterized by the output gap closing, which indicates that the economy is operating at or near its potential output. During this phase, economic growth is typically strong, consumer confidence is high, and demand for goods and services increases. As businesses respond to heightened consumer demand, production ramps up, which can lead to upward pressure on prices, thereby making inflation a notable concern.

In contrast, during a late upswing, consumer spending does not drop significantly, as it is usually robust. Similarly, fiscal stimulus would often be less critical in this phase because economic growth is self-sustaining. Additionally, unemployment rates would typically decrease as businesses hire to meet increased demand, rather than peaking, indicating a healthy labor market. Thus, the dynamics of the late upswing phase heavily revolve around closing the output gap and managing the looming inflationary pressures.