Recession
A significant, broad fall in economic activity, often defined as two consecutive quarters of shrinking GDP.
In plain English
A recession is when the economy shrinks for a sustained period. Businesses sell less, some cut jobs, and people tend to spend more cautiously.
GDP (gross domestic product) is the total value of everything an economy produces. Two quarters (six months) in a row of falling GDP is a common rule of thumb for a recession.
An everyday example
During the 2008–09 financial crisis and the 2020 pandemic, UK GDP fell sharply, unemployment rose and many share prices dropped before eventually recovering.
Why it matters for investors
Recessions usually hit company profits, which can push share prices down. Central banks often respond by cutting interest rates. Markets frequently move ahead of the economy, falling before a recession is confirmed and recovering before it ends.
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Related terms
Education only, not financial advice. Examples are simplified and use illustrative numbers.