A recession is generally defined as two consecutive quarters of negative growth in Gross Domestic Product (GDP). Since GDP measures the overall level of goods and services produced in a given period, it is considered the most comprehensive indicator of the economy.
Economists argue that other factors such as industrial production, consumer confidence, and capacity utilization should be considered to determine if a recession is likely. The decline in these broader economic indicators is a stronger signal that a recession is imminent. In essence, the economy slows down long before an official recession occurs.
How do we know when we are in a recession? The simplest answer is that you will see it in your daily life. Construction, both residential and commercial, in your city will slow down. People you know may lose their jobs or take pay cuts. Product prices will drop as stores accumulate large inventories because people have stopped spending, necessitating price reductions to clear out certain items. In practical terms, this is what happens when you are in a recession. Statistically, the Purchasing Managers’ Index (PMI) for both the manufacturing and services sectors may fall below 50. Additionally, unemployment will rise, possibly above 6% or more.
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Shady Fouad is a technical analyst at LDN Company
Shady's strategic vision in the currency markets is reinforced by more than fifteen years of trading experience, which enables him to blend economic and technical analyzes with high efficiency, and find the best investment ideas for traders.
