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What is Recession?
A recession is when the GDP growth rate of a country is negative for two consecutive quarters or more. But a recession can be gauged even before the quarterly gross domestic product reports are out based on key economic indicators like manufacturing data, decline in incomes, employment levels etc.,
Although an economy can show signs of weakening months before a recession begins, the process of determining whether a country is in a true recession (or not) often takes time. A recession is short, but its impact can be long-lasting.
Why do recession occur?
Understanding the sources of recessions has been one of the enduring areas of research in economics. There are a variety of reasons recessions occur. Some are associated with sharp changes in the prices, which lead to steep drop in spending by both the private and public sectors.
Some recessions, like the 2008 global financial meltdown, are rooted in financial market problems. Sharp increases in asset prices and a rapid expansion of credit often coincide with accumulation of debt. As corporations and households get over-extended and face difficulties in meeting their debt obligations, they reduce investment and consumption, which in turn leads to a decrease in economic activity. Not all such credit booms end up in recessions, but when they do, these recessions are often more costly than others. In some countries with strong export sectors, recessions can be the result of a decline in external demand. Adverse effects of recessions in large countries—such as Germany, Japan, and the United States—are rapidly felt by their regional trading partners, especially during globally synchronized recessions.
Some recessions are also a result of global shocks like the current coronavirus-triggered lockdowns, which shut down economic activity in many countries.
Impact of a recession
One of the consequences of recession is unemployment, which tends to increase, especially among the low-skilled workers, due to companies and even government agencies laying off staff as a way of curtailing expenses. Another result of recession is drop in output and business closures. Fall in output tends to last until weaker companies are driven out of the market, then output picks up again among the surviving firms. With more people out of work, and families increasingly unable to make ends meet, there will be demands for increased government-funded social schemes. With drop in government revenues during recession, it becomes difficult to meet the increased demands on the social sector.
The most popular, or most recommended, policy for any country to dig itself out of recession is expansionary fiscal policy, or fiscal stimulus. This can be usually a two-pronged approach – tax sops and increased government spending.
Latest Updates on Recession
Gross domestic product expanded 3.9 per cent from July to September compared to the previous three-month period, better than analysts' expectations for 3.4 per cent growth
Stocks decouple, sell-off; Recession odds climb
Industrial production also rose more slowly than the previous month, showing a 5.1 per cent year-on-year increase in July, compared to a 5.3 per cent rise in June
A total of 220 panelists with $590 billion worth of assets under management (AUM)) participated in a survey conducted by BofA Securities between August 2 and August 8
The turmoil shaking global financial markets reflects a sudden fear that the Federal Reserve may have held its key interest rate too high for too long, heightening the risk of a US recession.
US stocks fell steeply on Monday amid fears the US central bank has waited too long to begin cutting interest rates
If policymakers pay attention to the needs of the country and act on them, the outcomes will be visible a decade from now-but doing nothing is not an option
The Office for National Statistics said gross domestic product expanded by 0.6 per cent in the three months to March, the strongest expansion since the fourth quarter of 2021
The fourth quarter GDP figure was also revised down to a negative 0.1% from a previous 0.0%, meaning that the euro zone was in a technical recession in the second half of 2023
The country's economy shrank by 0.1 per cent in the quarter to December, and 0.7 per cent in per capita terms, the New Zealand's official statistics agency, Stats NZ, announced on Thursday
Dimon said economic indicators have been distorted by Covid-19 and he takes them with "a grain of salt," saying the Fed should wait for more clarity before lowering interest rates
Eighty-five percent of all small businesses surveyed said they were satisfied with the success of their business, and 86 per cent said they achieved their 2023 business goals
Rishi Sunak, who came into power in October 2022, had made five major promises after assuming office, including taming down inflation and growing the United Kingdom economy
The strong hiring and wage growth could complicate or delay the Federal Reserve's intention to start cutting interest rates later this year
Also, inflation has been falling faster than expected, and the labor market is cooling but not collapsing
Britain's economy struggled to gain momentum in 2023, as households were squeezed by rapid inflation and the highest Bank of England (BoE) interest rates in 15 years
Global wheat, corn and soybean prices - after several years of strong gains - are headed for losses in 2023 on easing Black Sea bottlenecks and fears of a global recession
Q2 output also cut to 0.0% from 0.2% growth
Europe's biggest economy contracted by 0.1 per cent in the third quarter after growing by the same amount in the previous three-month period, according to official figures
In the month of September alone, Britain's economy grew by 0.2% from August when growth was revised down to 0.1% from 0.2%