Recession seems to be a word frequently used as the economy has been slowing, but what does it actually mean?

Recession is a word used to describe a situation where the gross domestic product (GDP) experiences two successive quarters of negative growth. GDP is the total output of goods and services produced by the UK.

Due to the current financial turmoil being felt across the world, the UK has fears that a recession is looming.

For more on this definition see: wikipedia/recession 

Has the UK experienced recessions in the past?

There have been 5 very serious post-war recessions over the last 35 years, in 1974, 1975, 1980, 1981 and 1991. In 1991, the economy declined over three consecutive quarters and annual GDP dropped 1.4 percent compared to the previous year.

Are there less formal indications of a recession?

Tough economic climate can have psychological effects on people, making them more thrifty on spending. As house prices have fallen and credit has become less easily available, mortgages are harder to get hold of. The cost of living has risen, and unemployment is increasing. All of these attributes have helped to slow the economy, and all the signs now point to recession. 

In the US, experts say people are living as if they were already in a recession, as living costs have increased very quickly over a short period of time. This has caused people to become more cautious, causing them to spend less, which is having further negative effects on the economy.

A similar scenario may be appearing in the UK and some experts have warned of the dangers of this causing the economy to slow, and the country talking its way into a recession.

When will we know if the UK is in a recession?

A big problem with identifying and declaring a recession is that it only becomes officially recognised after it has happened. Official GDP figures are published every quarter by the Office for National Statistics and sometimes estimates made must be revised when the official data emerges.

For example, if the UK was to go into a recession in the last two quarters of 2008, it would not be confirmed until early next year, or even 2010 depending on the severity.

What is the current situation in the economy?

The UK economy shrank between July and September for the first time in 16 years. If it continues to slow in the fourth quarter we will be classed as being in a recession.

According to the Office for National Statistics, output fell by half a percentage point, which a bigger drop than expected and has caused UK shares to fall and the pound to weaken.

The Chancellor Alistair Darling said he was confidence the UK would survive the slowdown.

He said the fall in UK output is due to the credit crunch, falling house prices and increasing energy prices, which has forced consumers to become more cautious.

The 0.5% fall in economic output is much higher than predicted and suggests further interest rate cuts to encourage growth.

It is the biggest drop in UK gross domestic product (GDP) since the first quarter of 1990 and the weakest rate of growth since the second quarter of 1992.

These figures have raised fears among experts who fear that a recession much like that experienced in the early 1990s could be approachinng, when unemployment hit 3million.

He says it is unlikely to be just a technical recession, but could be a year of negative growth. But the difference is now that interest rates are much lower, he says.

The Bank of England governor Mervyn King, admitted that a recession is on the cards. His views were echoed by Prime Minister Gordon Brown.

"Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too," he said.