A recession is a period when the economy of a nation contracts. In other words, business activity shrinks instead of expanding.
In economics, a recession is generally a period of at least two consecutive quarters of negative GDP growth. They are usually preceded by a period of strong economic growth, over investment, and over consumption.
During a recession, the GDP of an economy falls, income levels of people go down, there is an increase in unemployment, along with a decrease in industrial production and consumption.
It's a financially difficult time for a most of the population.
Economic indicators that could point to a recession are closely watched by governments and economists. Yet it's not easy to predict a recession in advance.
This is due to the fact that large economies are also very complex. It's not always possible, even for economists, to identify the factors that will trigger a recession.
However, once a recession hits, it's obvious to everyone.
Recessions can be short (less than a year) or long (a few years). They can also be deep (huge declines in GDP) or shallow (small declines in GDP). Long recessions can even have periods in between with short-lived positive GDP growth.
It's important to understand that recessions are a normal part of economic activity. Every boom phase in an economy is followed by a bust.
Recessions cause inefficient businesses to shut down. Banks reduce their lending and tighten their credit policies. Companies reduce their fixed costs and become more efficient.
The pain caused by recessions is temporary as the economy bounces back. Businesses emerge stronger with low debt, strong balance sheets, and good cash flows.
However governments don't like recessions. This is due to the high unemployment that it causes. They tend to intervene with policies to stimulate the economy. These include low interest rates and higher spending on infrastructure and social projects.
In recent times governments and central banks have directly infused money into economies by sending cash to people's back accounts and buying corporate bonds.
Nov 14, 2024
Will the price of gold rise or fall? Find out...
Aug 13, 2024
Will the stock market fall into a bear market this year? Find out...
Aug 3, 2024
Next week is a crucial one as worries grow in the US market over slowdown and recession concerns.
Jan 21, 2024
What can cause the stock market to crash in 2024? Find out...
Nov 20, 2023
Two reasons for the dip in oil prices and its outlook.
Sep 13, 2023
How to trade and invest after Nifty 20,000.
Jun 7, 2023
Midsized IT firms are facing strong headwinds and Mphasis is no exception. How long before the stock recovers?
May 29, 2023
Is the stock market in danger of crashing after Germany's announcement of recession.
May 11, 2023
This billionaire investor recently shared his views on the current economic situation, US dollar, gold, China, and more.
Apr 19, 2023
Infosys posts biggest fall since Covid. How long before the fallen angel finds its mojo back?
Oct 26, 2024
Will gold and silver continue to rise? Find out...
Aug 5, 2024
Three reasons why the Indian stock market is falling.
Mar 6, 2024
The price of gold is on the rise. Find out why...
Nov 24, 2023
How should you think about a potential market crash in 2024? Read on...
Oct 26, 2023
These are the reasons why the stock market is declining.
Jun 23, 2023
How events like recession and inflation impacts the portfolios of long term investors.
May 31, 2023
The US government has finally reached its debt ceiling. How will the markets react next?
May 25, 2023
Will the US debt ceiling cause a crash in the Indian stock market? Find out...
Apr 28, 2023
The IT major has announced a big share buyback worth Rs 120 billion. Here's all you need to know about it...
Apr 12, 2023
Before Indian IT stocks declare their Q4 earnings, take a look at the probable reasons why they're under pressure and what lies ahead...