Economic Recession Analysis using Python

A recession is an economic situation that arrives when the circulation of money in the economy is low for two consecutive quarters. When the circulation of money is low, it means people are not spending money in the market. When people don’t spend money, businesses face losses, which results in an economic slowdown and layoffs, which you must have already heard about in 2023. We will through the task of Recession Analysis using Python.

Recession Analysis

Recession is calculated and analyzed according to the growth in GDP, the growth in the unemployment rate, and the growth in consumer spending rate. But the most common way of measuring recession is by analyzing the monthly GDP growth data.

So, for the task of Recession analysis, we need to have a dataset of the monthly GDP growth of a country. That’s why we gonna use an ideal dataset for this task that is based on the monthly GDP growth rate of the United Kingdom.

Which I have downloaded from here.

Now in the section below, I will take you through the task of Recession Analysis using Python.

Recession Analysis using Python

Now let’s start this task of Recession analysis by importing the necessary Python libraries and the dataset:

Let’s have a look at the GDP growth over time:

As a recession means the decline in the circulation of money for two consecutive quarters, I will convert our monthly data into quarterly data to analyze the recession:

Now here’s how we can calculate and analyze recession based on quarterly GDP growth:

The red line shows the periods of negative GDP growth (considered recessions), and the green line shows the overall trend in GDP growth over time.

Let us now analyze the severity of the recession. The severity of a recession refers to the extent to which the economy contracts during a recession. A severe recession involves a deeper and more prolonged decline in economic activity, resulting in negative effects on employment, incomes and other economic indicators. Here’s how to analyze the severity of the recession:

So this is how you can use your Machine Learning And Data Science tool & technologies skills for the task of Recession Analysis using Python.

Summary

A recession is an economic situation that arrives when the circulation of money in the economy is low for two consecutive quarters. Recession is calculated and analyzed according to the growth in GDP, the growth in the unemployment rate, and the growth in consumer spending rate.