For how many consecutive quarters must GDP decline for an economy to be classified as in recession?

For an economy to be classified as in recession, it is universally accepted that there must be a decline in Gross Domestic Product (GDP) for two consecutive quarters. This two-quarter decline signifies a persistent economic downturn and is a standard benchmark used by economists and financial analysts. This definition reflects a broader trend where the economy exhibits weakening performance, affecting various sectors such as consumer spending, business investment, and employment levels.

The rationale behind requiring two quarters is to eliminate short-term fluctuations that could occur due to seasonal changes or other temporary factors affecting the economy. By looking for two consecutive quarters of decline, it provides a clearer picture of sustained negative economic performance, allowing for more accurate assessments and policy responses.

Understanding this concept is essential for evaluating economic health and making informed decisions in finance and investments.