Recession

The most common shorthand is the two-quarter rule: if a country's GDP (gross domestic product — the total value of goods and services produced) shrinks for two consecutive quarters, many commentators call it a recession. It's a convenient rule of thumb, but it's just that — a rule of thumb, not an official definition everywhere.

In the United States, the official call belongs to the National Bureau of Economic Research (NBER), a private research organization. The NBER looks at a broader set of indicators — employment, real income, industrial production, and retail sales — and often makes its determination months after the fact. That's why a recession can be declared after markets have already moved significantly.

Suppose an economy posts GDP growth of −0.5% in the first quarter and −1.2% in the second. Under the two-quarter shorthand that's a recession, but the NBER might disagree if the labour market stayed strong throughout. This distinction matters when reading economic indicators. Traders typically watch leading indicators — like new jobless claims or manufacturing orders — for early warning signs rather than waiting for an official declaration. You can track relevant data on the economic calendar.