A Recession is an economic slowdown that leads to a drop in incomes and spending and, sometimes, to high levels of unemployment. It may also involve a decline in investments or an increase in debt defaults. There are many theories about what causes recessions, but they usually start with some kind of unexpected shock. These can be economic, financial or psychological.
For the most part, recessions are characterized by a decline in real gross domestic product (GNI), which measures the monetary value of all final goods and services produced in a country. The NBER’s definition of a recession combines GDP with other indicators to determine when there is a contraction in the economy. Historically, economists have considered a recession to have begun when there is a two-consecutive-quarter decline in GNI.
As the global economy slowed down in 2019, some analysts have warned that we are entering a recession, or at least a period of slower growth. The warnings have come amid a cooling labor market, a cooling housing market and a number of other economic factors, including a sharp slowdown in global trade.
A recession can have serious effects on people’s lives, and it can be hard to predict. But if you’re able to build a budget and plan your spending, you can make the most of any potential downturn. That includes spending a little less and saving what you don’t need, rather than splurging on unnecessary items. In addition, you can look for opportunities to buy high-quality assets at discounted prices during a downturn.
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