How to know when you’re in a recession?

How to know when you’re in a recession?

A recession is defined as a decline in real GDP for two consecutive quarters. We will know an economy is in an official recession after six months of falling national income. A recession will typically lead to higher unemployment, decline in confidence, falling house prices, decline in investment and lower inflation. However, although that may seem quite straight forward, in practise it can be difficult to know. GDP stats may not tell us until a significant time lag after the event. The ability to know whether you’re in a recession is…

Consumer confidence

Consumer confidence

Consumer confidence is the outlook that consumers have towards the economy and their own personal finance situation. This outlook can be optimistic (high consumer confidence) or pessimistic (low consumer confidence) The level of consumer confidence will be an important factor that determines the willingness of consumers to spend, borrow and save. A high level of consumer confidence will encourage a higher marginal propensity to consumer. A fall in levels of consumer confidence is often an indicator of an economic downturn. Factors that affect consumer confidence House prices – A form of…

Lagging and leading indicators

Lagging and leading indicators

A lagging indicator is an economic statistic that tends to have a delayed reaction to a change in the economic cycle. A leading indicator is an economic statistic that tend to predict future changes in the economic cycle. A co-incident indicator is a variable that changes with the whole economy. Recession of 2008 was very deep, but which statistics indicated it would happen? Lagging and leading indicators explained At the start of a recession, we may get a fall…

The impact of an ageing population on the economy

The impact of an ageing population on the economy

One of the great achievements of the twentieth century is a dramatic rise in life expectancy. For example, life expectancy in the US has increased from 45 in 1902 to 75.7 in 2004 (link). Even in the past 50 years, life expectancy has risen in most western economies. Life expectancy   However, increased life expectancy combined with declining birth rates have caused many to worry about the impact of an ageing population. Frequently, we hear about…

The importance of economics

The importance of economics

Readers question: What is the importance of economics? Economics is concerned with the optimal distribution of resources in a society. The subject involves Understanding what happens in markets and the macro-economy. Examining statistics about the state of economy and explaining their significance Understanding different policy options and evaluating their likely outcomes. Examples of the importance of economics Dealing with a shortage of raw materials. Economics provides…

Relationship between stock market and economy

Relationship between stock market and economy

Readers Question: What’s the relationship between a countries economy and it’s stock market? Is it always true that the stock market reflects a country’s economic conditions? Generally speaking, the stock market will reflect the economic conditions of an economy. If an economy is growing then output will be increasing and most firms should be experiencing increased profitability. This higher profit makes the company shares more attractive – because they can give bigger dividends to shareholders. Dow Jones industrial average Dow…

The great recession 2008-13

The great recession 2008-13

The great recession refers to the economic downturn between 2008 and 2013. The recession began after the 2007/08 global credit crunch and led to a prolonged period of low/negative growth and rising unemployment. In particular, the great recession highlighted problems within the Eurozone leading to a double dip recession and higher unemployment. This shows the sharp fall in real GDP in the UK economy in 2008 and 2009. It was also the slowest recovery on…

Economic record of Osborne and Cameron – 2010-2016

Economic record of Osborne and Cameron – 2010-2016

How to judge George Osborne’s and David Cameron’s economic record since May 2010? They inherited an economy recovering from a deep recession, high unemployment and large budget deficit. It was a difficult economic circumstance, but at the same time you might expect a strong economic recovery as there was much unused capacity and potential for economic growth. The chancellor and supporters will point to a stronger economic recovery than Europe, falling unemployment and a large reduction in the budget deficit. His critics will argue the austerity of 2010-12 was unnecessary – causing…