A global recession is an extended period of economic decline that affects a significant number of countries. This usually entails more or less synchronized downturns in many national economies, as the interconnected nature of trade relations and financial systems can transmit economic shocks from one region to another.
Recessions typically involve a fall in the economy’s output, or gross domestic product (GDP). The GDP figure drops, industrial production and investment decline, and unemployment rises. Inflation and consumer confidence also decline, so consumers are less likely to spend money. This tends to make companies reluctant to invest, and can amplify the effects of a downturn, bringing about stagflation as prices for basic goods begin rising faster than incomes.
While a recession can be triggered by any event or series of events, the onset of a global recession often has political roots and is exacerbated by social tensions that may be driven by the slowing of growth. This can trigger a wave of protests and demonstrations. In the case of the 2008 global crisis, disaffected youth took to the streets in Brazil and Israel over a minor bus-fare hike, but this was amplified by the broader sense of economic stagnation.
A global recession is harder to predict than a normal business cycle. Among other things, it depends on the policies of incoming administrations, which can amplify or dampen the effects of a downturn. The Trump administration’s aggressive trade and fiscal policy could lead to a recession next year, even if Powell and his colleagues in the Fed continue to support share prices with easy credit.