An economic downturn or recession is a significant decline in economic activity spread across the economy, lasting more than a few months. During a recession, the economy shrinks because of pullbacks in economic activity, especially consumer spending and business investment. Companies lay off workers and slow hiring, unemployment rises, and wage growth stalls. GDP growth tends to shrink during recessions because theres less consumer demand and fewer employees, leading to lower production of goods and services. Housing prices may also decrease.

There is no official definition of a recession, but most commentators and analysts use two consecutive quarters of decline in a country’s real (inflation-adjusted) gross domestic product (GDP) as a practical definition of recession. The NBER’s Business Cycle Dating Committee defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators” .

Economic downturns generally occur in cycles, and its likely that a business will experience an economic downturn more than once over the life of the business. Monitoring the economic environment and that of the industry or sector will help businesses make plans and be prepared. Businesses can take practical steps to help survive a downturn, such as analyzing the risks to the business and putting strategies in place to reduce and survive the impacts of a downturn.