DOUBLE-DIP RECESSION

What’s a double-dip recession? 
A double-dip recession refers to a shortlived recovery of an economy from a recession, before it slips back into a recession. In economic terms, when the GDP of an economy goes into the negative, after a brief period of showing positive growth, the economy is said to be faced with a double-dip recession.

According to economists, double-dip recessions may also be referred to as ‘W’- shaped recession where the two dips in the ‘W’ represent the double-dip recession, and the quick incline in the middle is the intermediate recovery.

What are the indicators of a double-dip recession? 
Return to negative GDP growth after a partial economic recovery is a sign of the economy entering into a double-dip recession.
    The equity securities exchanges show bearish sentiments, when markets sense a double-dip recession lurking around the corner.
    The per capita income growth will vary between low to negative, and this over a sustained period of time, when the economy is spiralling towards a recession again.
    Lower consumer spending would force producers to lower their selling prices and thus cut down on its production costs, which will lead to higher rate of unemployment in the economy.

When was the last major double dip recession? 
Between 1980-82, the US went into one of the double-dip recessions. The economy was in a recession in the second and third quarters of 1980. It then recovered (by GDP standards) and fell back into recession in the fourth quarter of 1981 and the first quarter of 1982.
    One thing that happened during that time period that the US does not have now is inflation and high interest rates. Though today, unemployment remains a concern in the US, which could be a trigger for another recession. However, the Federal Reserve is determined to keep interest rates low throughout 2010.

Read this good article Arthur Laffer: the 'double dip' recession coming in 2011

Source: Economic Times