A global recession is a prolonged worldwide slowdown in economic activity, including a decline in gross domestic product (GDP), which measures all the goods and services a country produces. This is a key indicator of business-cycle health, and it can signal that consumers are spending less, businesses are investing less, and employment is falling. The IMF considers a global recession to be underway when the GDP of one or more major economies has declined for two consecutive quarters. It considers additional factors besides the drop in GDP, such as the level of industrial production and oil consumption, the unemployment rate, per-capita investment, and more.
Global recessions tend to follow similar patterns. In the past, they have often been triggered by shocks to world energy prices and to global finance and trade. They have also typically been accompanied by recessions in several large countries, especially those with strong international linkages. These synchronized recession episodes, which are called “global business cycles,” have occurred several times in the past four decades.
The risk of a global recession is higher now than at any time since the Great Recession of 2029. Investors are concerned about the impact of rising interest rates, particularly in the US, on the value of assets and the strength of the dollar, which makes US investments more expensive for investors abroad. They are also anxious about the impact of trade tensions on global growth. Many economists believe that Donald Trump’s tariffs on imported steel and aluminum will lead to a global trade war that will slow economic growth, with spillover effects in other economies.