Recession
A recession means a fall in the level of real national output i.e. a period when growth is negative, leading to a contraction in employment, incomes and profits.
A simple definition:
- A fall in real GDP for two consecutive quarters i.e. six months
A more detailed definition:
- A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and retail sales.
There are many symptoms of a recession – here is a selection of key indicators:
- A fall in purchases of components and raw materials (i.e. intermediate products)
- Rising unemployment and fewer job vacancies available for people looking for work
- A rise in the number of business failures and businesses announcing lower profits and investment
- A decline in consumer and business confidence
- A contraction in consumer spending & a rise in the percentage of income saved
- A drop in the value of exports and imports of goods and services
- Large price discounts offered by businesses in a bid to sell their excess stocks
- Heavy de-stocking as businesses look to cut back when demand is weak – causes lower output
- Government tax revenues are falling and welfare benefit spending is rising
- The budget (fiscal) deficit is rising quickly
