Recession - What does it mean?

The word 'recession' has been used in the news almost everyday for the last 3 or 4 years.  When people talk about the economy being in recession do you know what it means?

The technical definition tells us the economy is in recession if it shows negative growth for two successive quarters.

Or, in simpler terms if the amount of services and goods produced by the UK (the Gross Domestic Product or GDP) falls every 3 months for a period of 6 months.

Types of Recession
Mild Recession - The economy may shrink for 2 successive quarters (6 months) but then recover over the remainder of the year to show an increase in productivity over a period of 12 months.

Severe Recession - When the economy shows a decline over 4 successive quarters (a full year) the recession is labelled as severe or full-blown.

Double-dip Recession - An economy may slide back into recession after appearing to have recovered. This type of longer term recession makes recovery more difficult.

This graph shows UK Economy Growth over recent years.  The areas highlighted in Red indicate recession as they cover 2 quarters or more.

The 2008/2009 recession is a Severe Recession as it continued for 5 consecutive quarters.

The large 3rd quarter increase of 2012 is thought to be due to the Olympics bringing money into the UK economy.