ORIGINAL: Chickenboy
... The Conference Board is also the determining body for whether we have, or have had a recession. A common (but mistaken) belief is that a recession is two consecutive quarters of economic contraction. It's not. These guys call the ball...
This is my number 1 irritant when I hear or read economic analysts/commentators referring to a "technical recession" being 2 consecutive quarters of negative GDP growth.
1. Unlike the USA, most nations do not have an official mechanism to determine whether they are in recession, or the forgotten (because it has such bad connotations) depression. Chickenboy is quite correct in stating the USA is considered to be in a recession (or depression) only if it is officially declared. Private opinions don't come into it at all.
2. The reason why the term "technical recession" has come into popular usage is the usual reason, misrepresentation of an academic paper. Many years ago a couple of American economic historians studied C19th USA economic downturns (aka official recessions/depressions) and their published conclusion was that in all instances, GDP had declined for at least two consecutive quarters. From that conclusion stems the lazy takeup which is referred to as a "technical recession".
3. To demonstrate the nonsense of the widely held "technical recession" view consider this simple example, which occurs all the time. A country experiences 0.5% negative growth in Q!, 0.1% positive growth in Q2, negative growth of 0.5% in Q3, and positive growth of 0.1% in Q4. According to the "technical recession" proponents, as the country did not experience two consecutive quarters of negative growth, it was never in a recession. Yet over the entire year, that country's economy did shrink. Guess which metric politicians prefer to use.
4. The repercussion of the exemplar in $3 above are actually even worse than at first glance.
(a) quarterly GDP figures are based on survey data, they are not based on census data. As such they are subject to statistical error. The miniscule positive growth of 0.1 % in quarters 2 and 4 fall within the margin of error. This is why all economic indicators are subject to later revision.
(b) the economic indictors deal with aggregates, they are rarely discussed on a per capita basis by economic pundits, even though the per capita data is often available, provided one does a bit of digging. Assume a country runs a positive net immigration program. This population increase,
ceteris paribus, will automatically increase aggregate economic activity (aka GDP), yet per capita GDP may stagnate or even decline. It is a very rare economic pundit who draws attention to a to a "technical per capita recession".
Alfred