What is a recession?

A recession is characterized as a significant decline in economic activity across the economy that lasts more than a few months. This definition encompasses various indicators, notably a reduction in gross domestic product (GDP), rising unemployment rates, decreased private sector spending, and a drop in consumer confidence. During a recession, businesses may face lower sales and profits, prompting them to cut back on investments, hire fewer employees, or even lay off existing workers, which further contributes to the economic slowdown.

This period is typically recognized when there are two consecutive quarters of negative GDP growth, although significant declines in other economic indicators also play a crucial role. Understanding a recession as such is important for analyzing how the economy behaves during downturns and the policy measures that may be implemented to stimulate recovery.