What is a recession?

WIKIPEDIA EDITORS cannot agree on the definition of “recession”. Last month the site barred new and unregistered users from editing its page on the subject, after a fierce dispute over the claim that two consecutive quarters of falling GDP indicates a recession. The page, which had previously been tweaked just 24 times in 2022, was edited 180 times in a week. Nor is the debate confined to interested amateurs. In America it has been the subject of political sparring. On August 12th Britain’s Office for National Statistics announced that the country’s economy had shrunk in the second quarter of the year; economic forecasters think further declines lie ahead. So what constitutes a recession?

In short, a period of significant decline in economic activity. A recession typically leads to drops in output and investment, falling profits for businesses and rising unemployment. The global financial crisis of 2007-09 shaved almost 4% off economic growth worldwide. In some countries, including Britain, France and Germany, the convention is that two quarters of negative GDP growth indicates a recession. But many economists believe this definition is too narrow. Japan’s cabinet office uses multiple indicators, including factory output, retail sales and employment. America’s government has ceded the authority to declare a recession entirely. It defers to the National Bureau of Economic Research (NBER), a private, nonprofit research group.