Definition of Cyclical industry:
A cyclical industry is a type of industry that is sensitive to the business cycle, such that revenues generally are higher in periods of economic prosperity and expansion and are lower in periods of economic downturn and contraction. Companies in cyclical industries can deal with this type of volatility by implementing employee layoffs and cuts to compensate during bad times and paying bonuses and hiring en masse in good times.
Cyclical industries are sensitive to business cycles, so downturns in the cycle force consumers to prioritize expenses and potentially pare some costs that are not essential. Therefore, industries that focus on nonessential products face the biggest risk of revenue loss when economic contraction takes hold. By contrast, industries such as utilities tend to weather economic storms much better, because no matter how bad times are, most people find a way to pay their light bill.
Industry that is sensitive to economic cycles and moves in step with them, such as automobiles, housing, and steel industries which prosper in times of economic growth and stagnate in times of recession. Industries like drug manufacturing and healthcare are generally non-cyclical.
Meaning of Cyclical industry & Cyclical industry Definition