作为一个重要的例子，在1980年代后期，新西兰的经济以每年4%以上的速度迅速增长。然而，这似乎是一个不可持续的领导通货膨胀，随后在90年代早期衰退(checheritage – westphal and Rother, 2012)。
Type of Spending Driving Economic Cycle in Manufacturing Industry of NZ
The economic cycle can be defined as the cycle in which the economy shows natural fluctuation in the duration of recession or contraction and growth or expansion. Factors like consumer spending, levels of employment, rates of interest and GDP can assist in the determination of the present step of the economic cycle (Gordon, 2014). In the duration of expansion, investors focus on purchasing companies in basic energy, capital goods and technology. On the other hand, in the duration of contraction, investors show preference in purchasing companies from the industry of healthcare, financials and utilities. The trade or business cycle is in relation with the volatility faced in the growth of economy. This also is true for the varying periods through which the economy moves. This provides an explanation as to why factors like multiplier effect, investment, confidence and interest rates end up causing the economy to make a move by economic cycles.
As a significant example, during the later years of 1980s, New Zealand has been experiencing rapid growth of economy by more than 4 per cent in a year. However, this appears to be an unsustainable leadership of inflation, followed by a recession during the early years of 1990s (Checherita-Westphal and Rother, 2012).
There are four phases of the business cycle that are growth of economy, boom of economy, downturn of economy and recession. Economic growth is the phase in which there is an increase in real output. Economic boom is the phase in which there is fast growth of economy, with the tendency of being unsustainable and inflationary. Economic downturn is the phase in which there is a fall in the rate of growth and the economy ends up moving towards the next phase that is recession. Recession is the period involving negative growth of economy and considerable decrease in real output.
The figure below depicts the shifting trend in logarithm of GDP based on real expenditure between the period of 1987 and 2010. Also, there has been plotting of the trend component filtered by HP for “֑ƛ” that has a value of 1600. In this duration, there has been a growth in real GDP up to 178 per cent when considering the original level. The GDP of New Zealand can be categorized by various fluctuations in its trend of long term. These statistical attributes are significant and useful for describing, defining and analyzing the nature of business cycles of manufacturing industry in New Zealand.