Some economists prefer a definition of a 1. The NBER defines an economic recession as: In the United Kingdomrecessions are generally defined as two consecutive quarters of negative economic growth, as measured by the seasonal adjusted quarter-on-quarter figures for real GDP  with the same definition being used for all other member states of the European Union. These summary measures reflect underlying drivers such as employment levels and skills, household savings rates, corporate investment decisions, interest rates, demographics, and government policies.
Some economists have jokingly defined a recession like this: If your neighbor gets laid off, it's a recession. If you get laid off, it's a depression. Economists officially define a recession as two consecutive quarters of negative growth in gross domestic product GDP. The National Bureau of Economic Research cites "a significant decline in economic activity spread across the economy, lasting more than a few months" as the hallmark of a recession.
Both definitions are accurate because they indicate the same economic results: In the article we'll explain how the impact of these broad-spectrum slowdowns on both large and small businesses can be very damaging, and in some instances, catastrophic.
Some businesses may be affected only moderately, or not at all, if the recession is mild and brief. If the recession lingers and the downturn is widespread, all big businesses - firms publicly traded on major stock exchanges - may ultimately be hurt.
How a Recession Impacts Large Businesses Let's take an unnamed Fortune manufacturer as a typical big business suffering the effects of a recession. What happens to this firm will likely happen to other big businesses as the recession runs its course.
As sales revenues and profits decline, the manufacturer will cut back on hiring new employees, or freeze hiring entirely. In an effort to cut costs and improve the bottom linethe manufacturer may stop buying new equipment, curtail research and development and stop new product rollouts a factor in the growth of revenue and market share.
Expenditures for marketing and advertising may also be reduced. These cost-cutting efforts will impact other businesses, both big and small, which provide the goods and services used by the big manufacturer.
Falling Stocks and Slumping Dividends As declining revenues show up on its quarterly earnings reportthe manufacturer's stock price may decline. Dividends may also slump, or disappear entirely.
Shareholders may become upset. The manufacturer's advertising agency may be dumped and a new agency hired. The internal advertising and marketing departments may also face a personnel shakeup.
When the manufacturer's stock falls and the dividends decline or stop, institutional investors who hold that stock may sell and reinvest the proceeds into better-performing stocks.
This will further depress the company's stock price.
Learn how understanding the business cycle and your own investment style can help you cope with an economic decline in Recession: The sell-off and business decline will also impact employer contributions to profit-sharing plans or k plans if the company has such programs in place.
The customers of the company that owe it money may pay slowly, late, partially or not at all. Then, with reduced revenues, the affected company will pay its own bills more slowly, late, or in smaller increments than the original credit agreement required. Late or delinquent payments will reduce the valuation of the corporation's debtbonds and ability to obtain financing.
The company's ability to service its debt pay interest on the money it has borrowed may also be impaired, eventuating in defaults on bonds and other debt, further damaging the firm's credit rating and preventing further borrowing.
Debt Reckoning can teach you how a company's debt is an indicator of financial health. If the company's debts cannot be serviced and cannot be repaid as agreed upon in the lending contract, then bankruptcy may ensue. The company will then be protected from its creditors as it undergoes reorganizationor it may go out of business completely.
Employee Lay-offs and Benefit Reductions The business may cut employees, and more work will have to be done by fewer people.
Productivity per employee may increase, but morale may suffer as hours become longer, work becomes harder, wage increases are stopped and fear of further layoffs persists. Read about how employment statistics influence corporate confidence in Surveying The Employment Report.
As the recession increases in severity and length, management and labor may meet and agree to mutual concessionsboth to save the company and to save jobs. The concessions may include wage reductions and reduced benefits. If the company is a manufacturer, it may be forced to close plants and discontinue poorly performing brands.
Automobile manufacturers, for example, have done this in previous recessions. Cuts to Quality of Goods and Services Secondary aspects of the goods and services produced by the recession-impacted manufacturer may also suffer.
In an attempt to further cut costs to improve its bottom line, the company may compromise the quality, and thus the desirability, of its products. This may manifest itself in a variety of ways and is a common reaction of many big businesses in a steep recession.Investment in stock market is nothing short of a gamble, especially if you consider the volatile difficulties during the trading.
It is the place where people buy and sell shares and during the. Taiwan announced billions of dollars in spending and tax cuts due to declining growth and a 26 percent slump in the stock market in handful of countries in the whole world to have recorded a positive economic growth in and averted the effects of economic recession.
In second quarter of the Indian economy grew by % and gave. Global Recession and Impact on Various Sectors of Indian Economy: By In an interconnected global economy recession and economic turbulence in one part of the world has the potential to disrupt the economies of other countries in a major way.
A recession is typically accompanied by a drop in the stock market, an increase in . Indian Stock Market and Great Recession - Download as PDF File .pdf), Text File .txt) or read online. This study analyzes the impact of the outbreak of the Great Recession of on the behavior of the Indian stock market.
The Indian Stock Market and the Great Recession 61 Granger () causality test, we try to answer questions whether there existed different behavior of the SENSEX before the .
Nov 16, · NEW DELHI — India finally woke up to the global economic crisis Friday, as its stock market fell 2 percent to its lowest level in 14 months and concern mounted that its already slowing economy.