What defines a recession?

A recession is specifically defined as a period of significant decline in economic activity across the economy, typically identified by a decrease in gross domestic product (GDP) for two consecutive quarters. This decline impacts various sectors, including employment, investment, and consumer spending. During a recession, businesses may face decreased demand, leading to lower production and consequently reduced GDP.

Contrastingly, a decline in consumer sentiment does not necessarily equate to a recession; it may simply reflect negative feelings towards the economy without a corresponding decline in economic activity. Economic growth exceeding 3% over two consecutive quarters indicates a thriving economy rather than a recession, while high levels of inflation may lead to increased prices, impacting purchasing power but not directly defining a recession.