What is a 'Boom'

A boom refers to a period of increased commercial activity within either a business, market, industry or economy as a whole. For an individual company, a boom means rapid and significant sales growth, while a boom for a country is marked by significant GDP growth. In the stock market, booms are associated with bull markets, whereas busts are associated with bear markets.

BREAKING DOWN 'Boom'

Stocks that suddenly become very popular and gain strong, elevated market profits are the result of a stock boom. An example of this is the internet technologies boom or "dot-com bubble" that occurred during the late '90s. This was one of the most famous booms in stock market history.

A company or industry boom results in an increase of output, jobs and investment in that industry. Certain events can be citywide or nationwide booms for business activity, such as hosting the Olympics, which translates into capital investment, TV broadcasting deals, sponsorship deals and tourism. TV broadcasting revenue alone is projected to be $4.1 billion for the 2016 Summer Olympics in Brazil.

Conversely, a downturn in a particular industry or financial sector can result in a bust for an entire city or state, especially if the region has invested too heavily in that industry or sector. Arizona and Nevada are currently mired in an economic slump because they were hit hardest by the real estate bust and resulting mortgage crisis of 2007.

The cyclical nature of the market and the economy in general suggests that every strong economic growth bull market in history has been followed by a sluggish low growth bear market.

Trending Booms and Busts in the United States

On a more aggregate level, a boom is indicated by increasing output and income, employment, prices, profit, and interest rates. Economic observers break aggregate U.S. data down state by state in order to see the amount that each state contributes to variables such as real GDP per capita and real GDP growth per capita.

The U.S. states that have experienced the highest growth in real GDP per capita from 2000 through 2015 are North Dakota, South Dakota, Oregon, Oklahoma, Nebraska, Montana, Iowa, New York, Vermont and Texas. The U.S. states with the lowest rate of real GDP growth per capita over this same period of time are Nevada, Georgia, Arizona, Delaware, South Carolina, Michigan, Idaho, Florida, Missouri and North Carolina. The first set of states are considered to be sustaining a long-term boom, whereas the second set of states are considered to be suffering a long-term bust.

RELATED TERMS
  1. Bust

    A bust is a period of time during which economic growth decreases ...
  2. Boom And Bust Cycle

    A boom and bust cycle is a process of economic expansion and ...
  3. Busted Bond

    Bonds issued by an issuer who failed to pay the required interest ...
  4. Real Economic Growth Rate

    The real economic growth rate is measure of economic growth expressed ...
  5. Bull Market

    A bull market is a financial market of a group of securities ...
  6. Per Capita

    A Latin term that translates into "by head," basically meaning ...
Related Articles
  1. Insights

    5 States with the Highest GDP Per Capita

    Learn about the top five states ranked by their real gross domestic product (GDP) per capita as of 2014: Alaska, North Dakota, New York, Connecticut and Wyoming.
  2. Insights

    5 States with the Lowest GDPs Per Capita

    Learn about the top five states that have the lowest real gross domestic products (GDPs): Mississippi, Idaho, South Carolina, West Virginia and Arkansas.
  3. Insights

    Healthiest And Safest European Economies

    Economic indicators are to economists what symptoms are to doctors: signs of the relative well-being of the patient.
  4. Insights

    The GDP and its Importance

    GDP is an accurate indication of an economy's size. Few data points can match the GDP and its growth rate's conciseness.
  5. Investing

    3 Emerging Markets With Bright Prospects

    Learn about emerging and developed Asian markets, their economic machines, and which key factors contribute to real and per capita GDP growth.
  6. Insights

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of bull and bear markets, the two types of market conditions.
  7. Investing

    Where International Real Estate Is Booming

    Which country has the hottest property market right now? The answer will undoubtedly surprise you.
  8. Investing

    The Biggest Oil Towns in North Dakota

    Learn how the oil boom in North Dakota has transformed two small towns from sleepy agricultural outposts to booming centers of industry almost overnight.
  9. Insights

    The 10 Fastest and Slowest Growing State Economies

    Retail was the stand-out industry in the first quarter, and mining was ... not so good.
  10. Insights

    How Bull Markets Past and Present Stack Up

    Looking back at the history of bull markets can give some context on where we currently stand.
RELATED FAQS
  1. What is the average length of the boom and bust cycle in the U.S. economy?

    Learn more about the timing and impact of the expansion and contraction periods of the average business cycle in the U.S. ... Read Answer >>
  2. Is real GDP a better index of economic performance than GDP?

    Learn why real GDP is a better index for expressing the output of an economy, as it takes into account the factors that distort ... Read Answer >>
  3. What is GDP and Why Is It So Important To Investors?

    The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. What does ... Read Answer >>
  4. How does gross domestic product (GDP) affect standard of living?

    Find out how gross domestic product is used to measure standard of living. Find out which alternative metrics rely on GDP ... Read Answer >>
Hot Definitions
  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  2. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  3. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  4. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  5. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
Trading Center