A recession is a period of temporary economic decline marked by reduced production, trade, income and industrial activity. It is generally associated with falling demand and weaker business conditions across a broad part of the economy.
During a recession, companies may reduce output, postpone investment or lay off workers. Households may cut spending because of falling incomes or uncertainty, which can further weaken demand. Recessions vary in length and severity: some are brief and mild, while others develop into prolonged crises.
A common rule of thumb defines a recession as two consecutive quarters of declining real GDP, but that is not a universal formal definition. In the United States, the National Bureau of Economic Research examines a broader range of indicators, including employment, income, production and sales, when dating recessions.
“Contraction” is often used as a near-synonym, but “recession” is the standard label for a broad downturn. “Depression” describes a much more severe and sustained collapse, while “stagnation” means little growth rather than necessarily an outright decline.