|Quarter over Quarter||0.1%||0.1%||0.3%|
|Year over Year||0.2%||0.2%||0.4%|
Economic growth was unrevised in the October-December period with a minimal 0.1 percent quarterly increase and a 0.2 percent yearly rise in total output both matching their respective flash prints.
The GDP expenditure components also showed little change from their previous estimates. Hence, household consumption was up a quarterly 0.2 percent and gross fixed capital formation down 0.5 percent (business minus 0.2 percent, households minus 1.5 percent). Government spending rose a fractionally stronger 0.5 percent while a slightly larger 2.5 percent increase exports and unrevised 1.7 percent advance in imports saw the net export contribution a tick higher at 0.2 percentage points. Stock building subtracted 0.2 percentage points as indicated earlier and the contribution of final domestic demand was unrevised at 0.1 percentage points.
Economic activity looks to have picked up a little momentum this quarter although some business surveys remain decidedly cautions. A major area of weakness has been housing and with starts in January at their lowest level since April 2001, this looks likely to have been a drag on growth again this quarter. However, consumer confidence has been recovering and last month hit its highest level since May 2012.
Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.
GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market Investors like to see healthy economic growth because robust business activity translates to higher corporate profits. The GDP report contains information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. These data, which follow the international classification system (SNA93), are readily comparable to other industrialized countries. GDP components such as consumer spending, business and residential investment illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.
Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.
Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower. Currency traders prefer healthy growth and higher interest rates. Both lead to increased demand for a local currency. However, inflationary pressures put pressure on a currency regardless of growth.