Negative Growth

What Is Negative Growth?

Negative growth is a contraction in business sales or earnings. It is likewise used to allude to a contraction in a nation's economy, which is reflected in a diminishing in its gross domestic product (GDP) during any quarter of a given year. Negative growth is regularly communicated as a negative percentage rate.

Figuring out Negative Growth

Growth is one of the principal ways that analysts portray a company's performance. Positive growth means the company is improving and is probably going to show higher earnings, which ought to increase the share price. Something contrary to positive growth is negative growth, and this depicts the performance of a company encountering a decline in sales and earnings.

[Economists](/financial expert) additionally use growth to portray the state and performance of the economy by measuring GDP. GDP considers a huge number of factors to decide how the overall economy is doing. These factors incorporate private consumption, gross investment, government spending, and net exports. At the point when an economy is developing, it is an indication of success and expansion. Positive economic growth means an increase in money supply, economic output, and productivity. An economy with negative growth rates has declining wage growth and an overall contraction of the money supply. Financial experts view negative growth as a harbinger of a recession or depression.

Negative Growth and the Economy

Repeating periods of negative growth are one of the most regularly utilized measures to decide if an economy is encountering a recession or depression. The Recession of 2008, or the Great Recession, is an illustration of a period of economic growth estimated as over two years of negative growth.

The Great Recession started in 2008 and went on into 2010. The GDP growth rate in 2008 was - 0.1% and in 2009 it was - 2.5%. The GDP growth rate bounced back to positive in 2010 with a rate of 2.6%. Albeit the announcement of negative growth strikes fear into investors and consumers, just one of many factors add to a recession or depression.

Negative growth rates and economic contraction are likewise set apart by a lessening in real income, higher unemployment, lower levels of industrial production, and a decline in wholesale or retail sales. Nonetheless, the current state of the economy on occasion can be deceiving to when negative growth is happening or not. For instance, in circumstances where negative growth happens, the real value of wages is expanding, and consumers might believe the economy to be stable or moving along. Likewise, when an economy encounters both positive GDP growth and high rates of inflation, individuals might feel that the economy is on a decline.

Highlights

• Declining wage growth and a contraction of the money supply are qualities of negative growth, and financial experts view negative growth as an indication of a potential recession or depression.
• Negative growth is a decline in a company's sales or earnings, or a diminishing in an economy's GDP during any quarter.
• The 2020 COVID-19 pandemic and the Great Recession of 2008 were the last times the U.S. economy experienced huge negative growth.