Recession

Loading the player...

What is a 'Recession'

A recession is a significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.

BREAKING DOWN 'Recession'

Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis events can often trigger the onset of a recession. The global recession of 2008-2009 brought a great amount of attention to the risky investment strategies used by many large financial institutions, along with the truly global nature of the financial sytem. As a result of such a wide-spread global recession, the economies of virtually all the world's developed and developing nations suffered extreme set-backs and numerous government policies were implemented to help prevent a similar future financial crisis.

A recession generally lasts from six to 18 months, and interest rates usually fall in during these months to stimulate the economy by offering cheap rates at which to borrow money.

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Double-Dip Recession

    When gross domestic product (GDP) growth slides back to negative ...
  3. Recession Proof

    A term used to describe an asset, company, industry or other ...
  4. Economic Cycle

    The natural fluctuation of the economy between periods of expansion ...
  5. Pale Recession

    A phrase used in May 2008 by former Federal Reserve Board Chairman ...
  6. Economic Recovery

    A period of increasing business activity signaling the end of ...
Related Articles
  1. Active Trading Fundamentals

    Recession: What Does It Mean To Investors?

    Understanding the business cycle and your own investment style can help you cope with an economic decline.
  2. Insurance

    A Review Of Past Recessions

    Here we look at the biggest economic declines in the U.S. since the Great Depression.
  3. Entrepreneurship

    The Impact Of Recession On Businesses

    Find out how this economic cycle affects both small and big business.
  4. Economics

    What Causes A Recession?

    Many factors contribute to a recession, but the biggest one is inflation.
  5. Fundamental Analysis

    Do Declining Corporate Margins Point To Recession in 2016?

    Learn how declining profit margins have foretold nearly every recession of the past 50 years, and analyze whether they may signal economic contraction in 2016.
  6. Bonds & Fixed Income

    Tips For Recession-Proofing Your Portfolio

    Find out what to do when the sun sets on a burgeoning market.
  7. Economics

    Industries That Thrive On Recession

    Find out where to turn when looking to invest in a tumultuous market.
  8. Personal Finance

    Will Your Net Worth Be Affected By A Recession?

    Here's a look at how a potential recession could impact your net worth in a negative way.
  9. Economics

    What Big Data Can Tell us about the Economy

    Given recent market turbulence, it’s no wonder that investors are wondering whether the economy is heading in the right direction.
  10. Forex

    PIMCO Report: 3 Thoughts on Recession

    Find out what PIMCO's March 2016 Macro Perspectives report says about the likelihood of recession in 2016 and the years thereafter.
RELATED FAQS
  1. How do financial markets react to recessions?

    Learn more about the relationship between recessions and financial markets by identifying the fundamental characteristics ... Read Answer >>
  2. Why does unemployment tend to rise during a recession?

    Learn what a recession is, some attributes of an economy in a recession, and why the unemployment rate tends to have a domino ... Read Answer >>
  3. Is cyclical unemployment always due to recessions?

    Learn about the mechanisms that cause cyclical unemployment and find out about the role recessions and downturns play in ... Read Answer >>
  4. What is a growth recession?

    A growth recession is an instance in which an economy grows at such a slow pace that it creates net unemployment, meaning ... Read Answer >>
  5. Do interest rates increase during a recession?

    Learn why interest rates do not rise in a recession; in fact, the opposite happens. Identify the factors that reduce interest ... Read Answer >>
  6. What is the correlation between term structure of interest rates and recessions?

    Discover the importance of the term structure of interest rates, also known as the yield curve, and its predictive power ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center