Recession

In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster (e.g. a pandemic). There is no official definition of a recession, according to the International Monetary Fund.

In the United States, a recession is defined as "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales". The European Union has adopted a similar definition. In the United Kingdom and Canada, a recession is defined as negative economic growth in GDP for two consecutive quarters.

Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply and decreasing interest rates or increasing government spending and decreasing taxation.

Definitions

In a 1974 opinion article in The New York Times, Commissioner of the Bureau of Labor Statistics Julius Shiskin suggested that a rough translation of the bureau's qualitative definition of a recession into a quantitative one that almost anyone can use might run like this:

In terms of duration – Declines in real gross national income (GNI) for two consecutive quarters; a decline in industrial production over a six-month period.