recession

A recession is a significant decline in economic activity across the economy that lasts more than a few months. It is typically reflected in lower real GDP, reduced income, rising unemployment, decreased manufacturing, and weaker retail sales. The depth and duration of recessions vary by country and by episode.

Measurement and indicators are varied. In many economies, economists monitor real GDP, the unemployment rate, consumer spending, industrial production, and wholesale-retail trade. In the United States, the National Bureau of Economic Research (NBER) dates recessions as periods of substantial and widespread decline in economic activity, with peaks and troughs identified after examining multiple indicators. A common rule of thumb—two consecutive quarters of negative real GDP growth—is often cited but is not a formal determination. Central banks and statistical agencies publish monthly data and monitor the yield curve and other financial indicators during downturns.

Causes of recessions can include demand shocks, supply shocks, financial crises, policy mistakes, or sharp changes in credit conditions. They may arise from a single trigger or from a combination of factors, leading to deleveraging, reduced confidence, and slower investment and hiring.

Impacts are broad, including higher unemployment, lower household income, business closures, and weaker public finances. Policy responses typically involve monetary easing or stimulus measures to support liquidity and demand, along with fiscal actions and automatic stabilizers aimed at stabilizing the economy and accelerating recovery.

Global linkages mean recessions can be regional or synchronized across countries. Historical episodes differ in severity and length, and discussions of recession often contrast with more severe downturns such as depressions.