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See Also
See Again
© Getty Images
0 / 30 Fotos
Slowed consumer spending
- Economists are predicting a year of slow growth around the world in 2024. Consumer spending is slowing down, with further uncertainty ahead.
© Shutterstock
1 / 30 Fotos
Slowed consumer spending
- The US economy performed better than expected in 2023, which led the World Bank to announce that the recession risk had receded for the country in 2024.
© Shutterstock
2 / 30 Fotos
Economic fallout from crises
- However, the economic fallout from wars in Ukraine and the Middle East, coupled with persistent high inflation, make the possibility of growth "sluggish."
© Shutterstock
3 / 30 Fotos
What is a recession?
- A recession is a significant, widespread, and prolonged downturn in economic activity. Generally, a country must have at least two quarters of negative GDP (gross domestic product) growth to be deemed in a recession.
© Shutterstock
4 / 30 Fotos
What is a recession?
- More complex formulas are also used, that take into account things like industrial production, non-farm payrolls, and retail sales.
© Shutterstock
5 / 30 Fotos
A persistent decline
- To be considered a recession, there must be a persistent decline in economic activity, that is significant and pervasive.
© Shutterstock
6 / 30 Fotos
A persistent decline
- The actual recession itself may only last a few months. However, the effect of the downturn can mean the economy fails to recover to its peak for several years.
© Shutterstock
7 / 30 Fotos
Unemployment rate
- Apart from the aforementioned markers, the unemployment rate is another way to measure whether a recession is in the cards.
© Shutterstock
8 / 30 Fotos
Consumer sentiment
- Consumer sentiment is another key indicator of recession. The cost of living crisis has caused people to spend less, which in turn leads the economy to contract.
© Shutterstock
9 / 30 Fotos
What happens in a recession?
- In a recession, employment and consumer spending drops. Graduates and school leavers could also face more difficulty finding work.
© Shutterstock
10 / 30 Fotos
What happens in a recession?
- As stock markets fall, the value of investments declines. There is an increase in foreclosures as people default on debts, and banks are less likely to lend.
© Shutterstock
11 / 30 Fotos
What happens in a recession?
- These factors combine to lower the government's tax take, making the country's budget deficit larger. At the same time, government spending on social programs and unemployment rises.
© Shutterstock
12 / 30 Fotos
Stock market contraction
- When stock markets fall during a recession, this can lead to panic in the markets. Since World War II, there have been 12 recessions in the US. According to Goldman Sachs, the US index of stocks–the S&P 500–contracted by a median of 24% during these downturns.
© Shutterstock
13 / 30 Fotos
Corporate profits
- Corporate profits (as well as stock prices) would go down in a recession. If companies are unable to raise prices because of low spending, corporate earnings fall. This can lead to layoffs.
© Shutterstock
14 / 30 Fotos
How long do they last?
- On average, US recessions have lasted for 17 months. However, since the 1980s, several recessions have lasted less than 10 months on average.
© Shutterstock
15 / 30 Fotos
When was the last recession?
- At the outset of the COVID-19 pandemic in 2020, there was a two-month downturn in the economy that qualified as a recession despite its short duration.
© Shutterstock
16 / 30 Fotos
Unavoidable?
- Recessions are accepted as a part of the business cycle. They form part of the regular pattern of expansion and contraction that occurs in a country's economy, and are therefore unavoidable.
© Shutterstock
17 / 30 Fotos
Signs of a recession
- The labor market is the first place to show signs of a recession, but there have been strong numbers there, with 353,000 jobs added to the US economy in January 2024.
© Shutterstock
18 / 30 Fotos
Signs of a recession
- However, job numbers are only part of the picture. The number of full-time workers has decreased, and the number of hours worked is falling.
© Shutterstock
19 / 30 Fotos
Credit card delinquency
- Credit card delinquency is on the rise, with one top economist stating the consumer credit default cycle has arrived already. Currently, one in every 12 credit card holders is missing their payments.
© Shutterstock
20 / 30 Fotos
Retail sales
- Another indicator, retail sales, has also shown signs of falling. There was a 0.8% decline in retail sales numbers in January 2024.
© Shutterstock
21 / 30 Fotos
A soft landing
- Economists have been talking about a "soft landing" occurring rather than a full-blown recession, but it's unclear if that's still possible.
© Shutterstock
22 / 30 Fotos
A soft landing
- A soft landing is when the economy slows enough to bring inflation down to the Federal Reserve’s 2% target, without falling into recession.
© Shutterstock
23 / 30 Fotos
Inflation
- In a soft landing, the price of goods doesn't drop even though the rate of inflation steadies. Instead, over time, wages increase to boost purchasing power again.
© Shutterstock
24 / 30 Fotos
Stagflation
- In contrast, in a recession inflation usually falls faster. However, in the recessions of the 1970s, inflation didn't decrease, leading to a term called "stagflation."
© Shutterstock
25 / 30 Fotos
Stagflation
- Among economists, the consensus appears to be that they don't expect stagflation to return in the next year. Time will tell.
© Shutterstock
26 / 30 Fotos
Interest rates
- When inflation gets closer to 2%, the Fed usually cuts interest rates. This reduces the cost of having a mortgage or business loan, for example.
© Shutterstock
27 / 30 Fotos
Interest rates
- In a soft landing, interest rates would remain higher than in a full-blown recession. In a recession, interest rates would probably be cut lower.
© Shutterstock
28 / 30 Fotos
It's not looking good
- Whether 2024 sees a soft landing or a recession by the summer is unclear. However, economists are setting the tone, which seems to be one of preparing for the worst. Sources: (Business Insider) (BBC News) (Forbes) (Investopedia) (World Economic Forum) (AP News) See also: When economies crash—the world's worst financial crises
© Shutterstock
29 / 30 Fotos
© Getty Images
0 / 30 Fotos
Slowed consumer spending
- Economists are predicting a year of slow growth around the world in 2024. Consumer spending is slowing down, with further uncertainty ahead.
© Shutterstock
1 / 30 Fotos
Slowed consumer spending
- The US economy performed better than expected in 2023, which led the World Bank to announce that the recession risk had receded for the country in 2024.
© Shutterstock
2 / 30 Fotos
Economic fallout from crises
- However, the economic fallout from wars in Ukraine and the Middle East, coupled with persistent high inflation, make the possibility of growth "sluggish."
© Shutterstock
3 / 30 Fotos
What is a recession?
- A recession is a significant, widespread, and prolonged downturn in economic activity. Generally, a country must have at least two quarters of negative GDP (gross domestic product) growth to be deemed in a recession.
© Shutterstock
4 / 30 Fotos
What is a recession?
- More complex formulas are also used, that take into account things like industrial production, non-farm payrolls, and retail sales.
© Shutterstock
5 / 30 Fotos
A persistent decline
- To be considered a recession, there must be a persistent decline in economic activity, that is significant and pervasive.
© Shutterstock
6 / 30 Fotos
A persistent decline
- The actual recession itself may only last a few months. However, the effect of the downturn can mean the economy fails to recover to its peak for several years.
© Shutterstock
7 / 30 Fotos
Unemployment rate
- Apart from the aforementioned markers, the unemployment rate is another way to measure whether a recession is in the cards.
© Shutterstock
8 / 30 Fotos
Consumer sentiment
- Consumer sentiment is another key indicator of recession. The cost of living crisis has caused people to spend less, which in turn leads the economy to contract.
© Shutterstock
9 / 30 Fotos
What happens in a recession?
- In a recession, employment and consumer spending drops. Graduates and school leavers could also face more difficulty finding work.
© Shutterstock
10 / 30 Fotos
What happens in a recession?
- As stock markets fall, the value of investments declines. There is an increase in foreclosures as people default on debts, and banks are less likely to lend.
© Shutterstock
11 / 30 Fotos
What happens in a recession?
- These factors combine to lower the government's tax take, making the country's budget deficit larger. At the same time, government spending on social programs and unemployment rises.
© Shutterstock
12 / 30 Fotos
Stock market contraction
- When stock markets fall during a recession, this can lead to panic in the markets. Since World War II, there have been 12 recessions in the US. According to Goldman Sachs, the US index of stocks–the S&P 500–contracted by a median of 24% during these downturns.
© Shutterstock
13 / 30 Fotos
Corporate profits
- Corporate profits (as well as stock prices) would go down in a recession. If companies are unable to raise prices because of low spending, corporate earnings fall. This can lead to layoffs.
© Shutterstock
14 / 30 Fotos
How long do they last?
- On average, US recessions have lasted for 17 months. However, since the 1980s, several recessions have lasted less than 10 months on average.
© Shutterstock
15 / 30 Fotos
When was the last recession?
- At the outset of the COVID-19 pandemic in 2020, there was a two-month downturn in the economy that qualified as a recession despite its short duration.
© Shutterstock
16 / 30 Fotos
Unavoidable?
- Recessions are accepted as a part of the business cycle. They form part of the regular pattern of expansion and contraction that occurs in a country's economy, and are therefore unavoidable.
© Shutterstock
17 / 30 Fotos
Signs of a recession
- The labor market is the first place to show signs of a recession, but there have been strong numbers there, with 353,000 jobs added to the US economy in January 2024.
© Shutterstock
18 / 30 Fotos
Signs of a recession
- However, job numbers are only part of the picture. The number of full-time workers has decreased, and the number of hours worked is falling.
© Shutterstock
19 / 30 Fotos
Credit card delinquency
- Credit card delinquency is on the rise, with one top economist stating the consumer credit default cycle has arrived already. Currently, one in every 12 credit card holders is missing their payments.
© Shutterstock
20 / 30 Fotos
Retail sales
- Another indicator, retail sales, has also shown signs of falling. There was a 0.8% decline in retail sales numbers in January 2024.
© Shutterstock
21 / 30 Fotos
A soft landing
- Economists have been talking about a "soft landing" occurring rather than a full-blown recession, but it's unclear if that's still possible.
© Shutterstock
22 / 30 Fotos
A soft landing
- A soft landing is when the economy slows enough to bring inflation down to the Federal Reserve’s 2% target, without falling into recession.
© Shutterstock
23 / 30 Fotos
Inflation
- In a soft landing, the price of goods doesn't drop even though the rate of inflation steadies. Instead, over time, wages increase to boost purchasing power again.
© Shutterstock
24 / 30 Fotos
Stagflation
- In contrast, in a recession inflation usually falls faster. However, in the recessions of the 1970s, inflation didn't decrease, leading to a term called "stagflation."
© Shutterstock
25 / 30 Fotos
Stagflation
- Among economists, the consensus appears to be that they don't expect stagflation to return in the next year. Time will tell.
© Shutterstock
26 / 30 Fotos
Interest rates
- When inflation gets closer to 2%, the Fed usually cuts interest rates. This reduces the cost of having a mortgage or business loan, for example.
© Shutterstock
27 / 30 Fotos
Interest rates
- In a soft landing, interest rates would remain higher than in a full-blown recession. In a recession, interest rates would probably be cut lower.
© Shutterstock
28 / 30 Fotos
It's not looking good
- Whether 2024 sees a soft landing or a recession by the summer is unclear. However, economists are setting the tone, which seems to be one of preparing for the worst. Sources: (Business Insider) (BBC News) (Forbes) (Investopedia) (World Economic Forum) (AP News) See also: When economies crash—the world's worst financial crises
© Shutterstock
29 / 30 Fotos
How would a recession affect you?
Will there be a soft landing, or is a big crash on the way?
© Getty Images
In February 2024, the UK announced it had fallen into recession in the second half of 2023. Due to a much more severe contraction in the last quarter of the year, it joined Japan to became the second G7 country now in an economic downturn. Afterwards, Citi's chief US economist stated that he expects the US to fall into recession in the middle of 2024. But what exactly is a recession? And if one is coming, how could it affect you?
Click on to find out everything you need to know to prepare for the next big squeeze.
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