Sun Feb 15 17:50:00 CST 2015

Consensus Actual Previous
Quarter over Quarter 0.9% 0.6% -0.5%
Q/Q change - SAAR 3.7% 2.2% -1.9%
Year over Year -0.4% -1.9%

Fourth quarter GDP was up a less than expected 0.6 percent on the quarter or an annualized pace of 2.2 percent. The increase followed two quarters of contraction. From the same quarter a year ago, GDP declined 0.4 percent. For the year 2014, GDP was unchanged on the year after increasing 1.6 percent in 2013. The quarterly increase was the first since the first quarter of 2014 before the sales tax increase was imposed.

Consumption, which accounts for about 55 percent of GDP, increased a modest 0.3 percent on the quarter and less than the anticipated 0.8 percent increase. While the impact of the April sales tax increase on the retail sector has eased, some households are trimming spending as low nominal wage growth is not catching up with a higher cost of living amid the weak yen.

Private residential investment declined for a third consecutive quarter, this time by 1.2 percent after a drop of 7.0 percent in the third quarter and a 10.3 percent plunge in the second. However, private non-residential investment edged up 0.1 percent after slipping 0.1 percent in the quarter before.

Net exports (exports minus imports) added 0.2 percentage points as growth in exports outnumbered that in imports. Exports were up 2.7 percent on the quarter while imports gained 1.3 percent.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.

Gross domestic product is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.

The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.