What is a recession typically identified by?

A recession is typically identified by a fall in gross domestic product (GDP) over two successive quarters. This decline indicates that the economy is contracting rather than expanding, which is a key indicator of economic downturn. During a recession, economic activity slows down, leading to declines in consumer spending, business investment, and overall economic output.

The requirement of two successive quarters of negative GDP growth helps to distinguish a recession from short-term fluctuations in economic activity. It provides a clearer picture of a sustained period of economic decline, rather than temporary downturns that might occur in the business cycle.

This measure is widely recognized and used by economists and policymakers to assess the health of the economy, affecting decisions related to fiscal and monetary policy, as well as adjustments in business strategies. Understanding this definition is crucial for analyzing economic conditions and responding appropriately.