CH: Gross Domestic Product

Tue Mar 03 00:45:00 CST 2015

Consensus Actual Previous Revised
GDP Q/Q (SA) 0.3 0.6 0.6 0.7
GDP Y/Y (NSA) 1.7 1.9 1.9

Economic growth surpassed expectations last quarter. A 0.6 percent increase in total output versus October-December, when it rose a slightly stronger revised 0.7 percent, was double the market consensus and left the annual increase in real GDP steady at 1.9 percent.

However, private consumption was up only 0.3 percent or half the rate of the previous period and was easily outpaced by general government consumption which climbed a sizeable 1.9 percent. Investment was mixed with spending on equipment and software increasing a healthy 1.0 percent following a 1.4 percent gain last time but construction more than reversing the third quarter's 0.7 percent advance with a 1.4 percent decline. Inventories subtracted 0.2 percentage points from quarterly growth.

Goods exports struggled and, excluding valuables, dipped 0.2 percent having risen a solid 5.0 percent in the third quarter. Exports of services expanded 0.6 percent but even this was only half the rate registered last time. Goods imports excluding valuables dropped 1.8 percent while services were up 0.5 percent.

Inevitably, inflation was weak and the GDP deflator showed no change on the year, down a tick versus its annual third quarter rate but matching the 2014 average.

The fourth quarter national accounts are moderately respectable but almost irrelevant in the context of the dramatic change in SNB FX policy in mid-January. This looks likely to have pushed the economy back into negative growth this quarter and has cast a major cloud over prospects for 2015 as a whole.

Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The first estimate includes the main GDP expenditure components as well as a breakdown of total output in terms of the major production and service sectors.

GDP 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.