UK Accounting Glossary
A period of time when economic activity is on the decline.
In economics, a recession is a contraction in the business cycle when there is a general decline in economic activity.
Period of general economic decline defined usually as a contraction in the GDP for six months (two consecutive quarters) or longer. Typically marked by high unemployment, stagnant wages, and fall in retail sales, a recession generally does not last longer than one year and is much milder than a depression. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). Although recessions are considered a normal part of a capitalist economy, there is no unanimity of economists on its causes.
Recessions in economics may be defined as a substantial decrease in economic activities in a particular economy. A recession normally lasts for more than a few months and has a tremendous negative impact on important aspects of the economy like industrial production, real income, employment, and both retail and wholesale trade. A couple of successive negative economic growth in a country’s GDP can be regarded as an indication of recession.
Recession is normally regarded as an unpleasant but usual part of a business cycle. The normal duration of recession ranges from half a year to one and a half year. Rates of interest normally go down when there is a recession. This is done in order to revive the economy through the facilitation of money borrowing processes.
As a rule of thumb, a recession is a fall of a nation’s gross domestic product (GDP) over two or more consecutive quarters. A recession is also referred to as a period of economic decline and reduced economic activity. Factors that may cause a recession to include overproduction, decreased demand, falling consumer and business confidence and major economic imbalances, among others. During a recession, the level of unemployment rises, investments decline, and prosperity lags. Real personal income and spending growth also have a tendency to slow if not decline during a recession. A recession can involve rapidly falling (deflation) or sharply rising prices (inflation). The average recession from 1945 to 2005 lasted about ten months but two went on for a record 16 months. The National Bureau of Economic Research is the official arbiter of what is and what is not a recession. A recession in one country can cause a recession to occur in others, specifically trading nations. A recession can be widespread and affect the entire economy or a recession can be industry-specific.
A bear market is one where prices of securities are going down. There is a lot of pessimism as far as various entities associated with a bear market are concerned and this implies that prices stay low. Selling of securities is very common in a bear market as investors are expecting to make losses.
Boom is a period in the economy when economic activities like sales increase at a rapid pace. In the case of share markets, boom takes place when there is a bull market. Busts, on the other hand, are related to bear markets. Since markets have a cyclical nature, booms and busts normally follow each other.
In economics, the business cycle is defined as inconsistent levels of economic activities that keep repeating themselves for a considerable period of time. Business cycles were once thought to be predictable in nature but are presently regarded as being inconsistent.
Double-dip recession is an economic situation whereby the rate of growth of gross domestic product of an economy comes down after a few quarters where there has been only a negligible amount of growth in the gross domestic product of the same.
Several major retailers cut back on inventory this Christmas season due to the recession.
Market forecasters have been talking about the probability of a recession for quite some time now.
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Definitions for Recession are sourced/syndicated and enhanced from:
This glossary post was last updated: 11th December 2019.