The economy
Recession
A significant, broad-based decline in economic activity lasting more than a few months.
How it works
The popular shorthand is two consecutive quarters of falling GDP. Official arbiters use a wider set of indicators including employment, income and production.
Recessions are usually declared well after they began, because the data needed to identify one arrives late.
Where it misleads people
Markets fall before recessions are announced and often rise before they end. Positioning for a recession once it is in the news is positioning for something already priced.
Related terms
- Gross domestic productThe total value of goods and services an economy produces in a period.
- Inverted yield curveWhen short-term bonds yield more than long-term ones — historically a recession warning.
- Bear marketA fall of 20% or more from a peak; a correction is 10%, and a bull market is a sustained rise.
- Leading indicatorA statistic that tends to change before the wider economy does.
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