Financial Glossary: Recession


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Recession

Recession

A significant decline in general economic activity extending over a period of time.

It is visible in industrial production, employment, real income, and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's GDP. Recession is a normal (albeit unpleasant) part of the Business Cycle. A recession generally lasts from six to eighteen months. Interest rates usually fall in recessionary times to stimulate the economy by offering cheap rates at which to borrow money.

A recession affects different securities in different ways. For example, holders of High-quality bonds stand to benefit because Inflation and Interest rates may decline. Conversely, stockholders of manufacturing firms Will probably see company profits and dividends drop.

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