From The Free Forex Encyclopedia
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Revision as of 04:34, 17 February 2012
The newspaper definition of a recession is when the GDP rate declines by 2 or more consecutive quarters. The problem with this definition is that it makes it more difficult to say whether the economy is in a recession or not. This definition does not take into account other macroeconomic factors like unemployment.
Economists say that other factors like industrial production, consumer confidence and capacity utilization should be taken into account when stating whether a recession is in place. Declines in these macroeconomic factors help give a stronger signal that a recession in place.
The key economic variable to look at is the GDP rate, as it is a measure of the economic activity of the entire economy. If there is a continuous decline in GDP, it is a strong signal that a recession is in place. Other macroeconomic variables can be looked to support this claim.