How long does a recession last for?
Recessions last 11 months on average.
Since the end of World War II, the length of recessions has ranged from 6-16 months, according to NBER data.
The last recession that Australia faced in the early 90s lasted from September 1990 to September 1991.
The Great Depression, which began in 1929, lasted for almost four years, and the Great Recession of 2008 lasted 18 months.
Recessions are defined as periods of temporary economic decline during which trade and industrial activity are reduced. Recessions are generally identified by a fall in gross domestic product (GDP) in two successive quarters.
Today, there are two leading schools of thought on how long the coronavirus-induced recession will last. There’s team the-economy-has-been-paused-and-will-restart-as-soon-as-lockdown-does and team recovery-could-take-years.
Usually, during an economic downturn, governments try to encourage consumer spending. However, with the pandemic continuing to affect life as we once knew it, the public is being told to remain alert and stay away from a large number of activities that promote spending.
While some argue the global economy has been frozen in time, others say that the psychology of the lockdown will take much longer than one year to thaw.
As Peter S. Goodman explains in a New York Times piece,
“Households may remain agitated and risk-averse, making them prone to thrift. Some social distancing measures could remain indefinitely. Consumer spending amounts to roughly two-thirds of economic activity worldwide. If anxiety endures and people are reluctant to spend, the expansion will be limited — especially as continued vigilance against the coronavirus may be required for years.”
Unsurprisingly, individuals are likely to start coming up with ways to recession-proof their money during times of uncertainty.
And according to a UN report, developed countries are on track to be $2.7 trillion in debt.
Goodman explains: “In normal times, they could afford to roll most of that debt into new loans. But the abrupt exodus of money has prompted investors to charge higher rates of interest for new loans.”
How long does a recession last for? The average recession will last for 11 months. How long will this recession last for? It’s almost impossible to say given the unique set of circumstances that coronavirus has presented to the world.