Double-dip recessions, also called "W shaped" recessions, are painful to investors as they get burned on the way down and then burned again on the temporary recovery.
On Thursday, Britain's Office for National Statistics did just that, now saying the country did not experience a double-dip recession in the first months of last year.
A double-dip recession is when a country's economy contracts, then returns to positive growth for a short period of time, then falls back into recession.
Since the National Bureau of Economic Research (NBER) announced that the Great Recession of 2008 ended in June of 2009, there has been much discussion in the media and in academia regarding the possibility of a double-dip recession. While this term dates back to at least the early 1980's, there does not appear to be a generally-accepted definition of what is meant by a double-dip recession in either academia or within the public sector.
We utilize and extend this traditional approach to develop a working definition of double-dip recession. First, we recognize the distinction between a recovery and an expansion, with the former being an increase in real gross domestic product from the trough to the previous peak level of real GDP, and following, we define an expansion as the increase in real GDP beyond its previous peak level.
Our primary conclusion is that the United States has experienced only one double-dip recession since 1929, that occurring in the immediate post-World War II period.
Subsequent to this double-dip recession, there have been ten business cycles in the United States and peak real GDP in each successive cycle was greater than the previous peak or reversion point.