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Economic Recession

In the UK, the standard metric used by the Office for National Statistics (ONS) to declare a "technical recession" is two or more consecutive quarters of negative economic growth. This means the country's real Gross Domestic Product (GDP) has contracted for at least six months straight.

However, identifying a true economic recession often goes beyond this rigid two-quarter rule. The ONS and economists also look at the broader macroeconomic picture, focusing on three key factors:

  • Depth: How severe the drop in economic output actually is.
  • Duration: How long the economic slump lasts.
  • Diffusion: How widespread the decline is across the main sectors of the UK economy, such as services, production, and construction.

In recent years, UK economic downturns have been heavily influenced by squeezed living standards. Factors like high inflation outstripping wage growth and soaring mortgage rates have reduced households' disposable income, acting as primary catalysts for the contraction. Furthermore, economists monitor "real GDP per head" during these periods, as a rapidly growing population can sometimes mask the fact that individual living standards are actually falling.