Explaining recession

marc5180

I dont know if this is the right thread if not will someone move it to the appropriate thread.
Can someone explain what a recession is in laymens terms and if one were to happen in this country what would be the effect on the british public? Its something that im interested in but can't seem to find any answers that i understand.
Thanks in advance

TBeckett100

loosley speaking, a period where shoppers stop spending, companies streamline i.e. lay off staff, bills go up, business dont make money, and ryanair offer half penny flights.

Zammo

Two consecutive quarters of negative growth.

marc5180

what effect would it have on us though

ManAtHome

marc5180 wrote: »

what effect would it have on us though

Depends - does your job depend on poeple spending money they haven't got, do you have more month than money, do you depend on overtime/bonuses etc, reasonable/zero credit card debts..?

TBeckett100

well Marc, put simply, Carpet Right and DFS will have even more sales on then they do now!

Generali

A recession (as Zammo rightly says) is 2 consecutive quarters of negative GDP growth.

So what is that?

GDP is the total amount of money that an economy makes each year so if GDP falls, the economy as a whole is making less money.

So what happens?

If the amount of money being made by companies falls, they need less work to be done so they employ fewer people, give their existing employees less overtime or possibly even lay people off. These people then have less money to spend so other companies suffer and do the same to their workers. Slowly things get worse with more-and-more people losing their jobs and so on.

Eventually businesses start to go bust because they can't take the lack of orders. As you can imagine, it's usually the businesses that were a bit shaky anyway that go bust. That leaves more orders for their more productive competitors who can start to invest and take people on and so eventually things start to rise again.

Usually you'd expect a recession to last about a year, maybe less with a pretty bad economy leading into and out of recession for (say) a year either side but things can be a lot better than that (the US had a pretty bad time in 2001 and 2002 but recovered pretty quickly) or a lot worse (Japan's economy is still in a lot of strife and their problems started in 1989; a depression in the US started in 1929 and only really started to end in 1938).

Generally, asset prices fall (except govt bonds) before and during a recession. Share prices start to rise as recession starts to end and then you'd expect house prices to follow later.

Doozergirl

Generali wrote: »

A recession (as Zammo rightly says) is 2 consecutive quarters of negative GDP growth.

So what is that?

GDP is the total amount of money that an economy makes each year so if GDP falls, the economy as a whole is making less money.

So what happens?

If the amount of money being made by companies falls, they need less work to be done so they employ fewer people, give their existing employees less overtime or possibly even lay people off. These people then have less money to spend so other companies suffer and do the same to their workers. Slowly things get worse with more-and-more people losing their jobs and so on.

Eventually businesses start to go bust because they can't take the lack of orders. As you can imagine, it's usually the businesses that were a bit shaky anyway that go bust. That leaves more orders for their more productive competitors who can start to invest and take people on and so eventually things start to rise again.

Usually you'd expect a recession to last about a year, maybe less with a pretty bad economy leading into and out of recession for (say) a year either side but things can be a lot better than that (the US had a pretty bad time in 2001 and 2002 but recovered pretty quickly) or a lot worse (Japan's economy is still in a lot of strife and their problems started in 1989; a depression in the US started in 1929 and only really started to end in 1938).

Generally, asset prices fall (except govt bonds) before and during a recession. Share prices start to rise as recession starts to end and then you'd expect house prices to follow later.

All hail the king! :kisses2:

Generali

Doozergirl wrote: »

All hail the king! :kisses2:

<blushes>Too kind. Not sure what Mrs Generali will have to say!</blushes>

Doozergirl

It was only a kiss!! Albeit quite a passionate one :rotfl:

globalds

Generali wrote: »

Eventually businesses start to go bust because they can't take the lack of orders. As you can imagine, it's usually the businesses that were a bit shaky anyway that go bust. That leaves more orders for their more productive competitors who can start to invest and take people on and so eventually things start to rise again.

So which sector in the UK has the kind of shaky businesses that will go to the wall ...I'm thinking Banking and Northern rock type companies .
It can't be manufacturing ..There doesn't seem to be much of it left .