Recessions are triggered by economic shocks

Five charts to start your day

Ever wonder what kicks off a recession? The troublemaker is often an economic shock. These are like surprise punches to our economy's gut. Let’s run through some examples:

1. In the 1970s, oil prices quadrupled, causing the 1973-1975 recession.

2. The collapse of the US housing market in 2007 led to the Financial Crisis of 2007-2008 and subsequent recession.

3. The 2020 Covid-19 pandemic saw a brief but sharp recession in early 2020.

These examples show how unexpected events can quickly disrupt economic activity, leading to job losses, reduced spending and economic contraction. That's why economists look at leading indicators to spot signs of trouble. As you can see in the chart below from Game of Trades, they tend to be quite accurate.

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