What is the true meaning of Recession?

We all use the word ‘recession’ and we heard of it a lot these days as credit crunch and financial woes sets in. Stock markets are always in red rather than in the green. Ever-declining charts for shares are setting the investors around the world into a state of panic. Many people have been using this word, but only some actually knows what it actually means.

What does recession actually means?

The given definition of recession should be a substantial decline in activity across the economy, lasting a longer period which is usually more than a few months. The activity across the economy are reflected by various economic data like, industrial production, employment, gross income and wholesale-retail trade. From a technical point of view, a recession happens when there are two consecutive quarters of negative economic growth as measure by a particular country’s Gross Domestic Product (GDP). Usually recession last from 6 to 18 months.

So stock markets falling relentlessly does not necessary means that the economy is undergoing a recession. But recession however is something that cannot be avoided as it is considered as a part of the business cycle. For obvious reason, it is also the most dreaded and hated part of a business cycle.