How is a recession typically defined?

A recession is typically defined as two consecutive quarters of negative GDP growth. This definition stems from the understanding that a recession reflects a significant decline in economic activity across the economy, lasting more than a few months. GDP, or Gross Domestic Product, is a comprehensive measure of a nation’s overall economic performance and includes the total value of all goods and services produced. When GDP contracts for two consecutive quarters, it indicates a reduction in economic output, which is a key indicator of a recession.

This definition is widely recognized and used by economists and policy-makers when assessing economic health. It serves as a clear and measurable benchmark for understanding when the economy is experiencing a downturn. Other factors, like consumer spending, employment rates, and government investment, can all be affected during a recession, but they are not used as primary indicators for defining one. Instead, these elements might demonstrate the effects of a recession rather than serving as criteria for identifying its onset.