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Wednesday, 25 April 2012

UK Economy is in a Double Dip Recession - What is a double dip recession?

Figures released by the UK, Office for National Statistics (ONS), show that the UK economy is now in a double dip recession; the first time since the 1970s. What does the term double dip recession mean? The first step in understanding what a double dip recession is, involves defining the word recession. A recession is when the economic activity (GDP) of a country falls in two consecutive quarters (of the year). For example Jan, Feb, Mar and then Apr, May, June.

Economic activity in the UK is measured by the ONS and is reported as a figure known as the Gross Domestic Product (GDP). The Gross Domestic Product is the total value of goods and services produced by a country over a set period. The GDP for the UK in the first quarter (Jan, Feb, Mar) of 2012, was 0.2% less than the previous quarter. The GDP for the quarter covering Oct, Nov, and Dec 2011 was 0.3% less than the quarter before that. This means that GDP has fallen in two consecutive quarters and the UK is now in recession. GDP fell in quarter 4 of 2010 and quarter 2 of 2011 but as the falls didn't cover two consecutive quarters they weren't defined as a period of recession.

A double dip recession is when a country that managed to climb out of recession, falls back into recession. As the UK was last in recession in 2009, the current recession means that the UK is now experiencing a double dip recession. It is known as a double dip because if you drew a line showing how the economy was growing or shrinking, the line would go down (for the first recession), back up again for the period of growth and then back down again during the second recession.

If you would like to demystify more economic terms click on the following link:

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