What actually is a recession?

Question

I heard an economist on the news just now explain that the UK is on the brink of recession (and some say, already in it).

What does this mean? What happened? The Wikipedia entry left me a little baffled.

Answer 1

You have three different answers so far. Two of them are incorrect, and instead refer to other phenomena.

A recession is a statistical measurement of two consecutive quarters where GDP decreases from the same quarter, previous year. For there to be a recession in the UK, the GDP for Q1 2008 would have to be less than the GDP for Q1 2007, and the GDP for Q2 2008 would have to be less than the GDP for Q2 2007.

You don't need a recession to feel an economic pinch - the recession is simply a way of stating and measuring a period of downturn.

One of the other answers referred to a trade deficit - when more money is flowing out of an economy than is coming in. This does not bring a recession - in fact it may be sympomatic of economic growth.

The other answer had to do with a period of rising interest rates and rising inflation. This describes 1982-83 in the US, when the Fed raised interest rates rapidly in order to kill stagflation (a combination of high unemployment and high inflation rates).

Answer 2

I think the economics definition is two consecutive quarters of negative GDP growth.

I think UK had negative last quarter, and predictions this quarter will be nagative means unless things improve real soon, the UK will meet the two quarter negative growth definition.

Answer 3

Recession is the condition of economy when interest rate is increasing with increasing inflation rate. Since individuals have lower purchase  power, with increasing inflation they struggle more. Briefly, reduction in GDP in two quarters. I say it's worse economic condition in economics.

However an economics booms generally is followed by recessions, and they are natural.

Answer 4

In a nutshell it means when more money is going out of the country than is coming in the country is in recession.