Fri May 29 03:00:00 CDT 2015

Consensus Actual Previous
Quarter over Quarter 0.3% 0.3% 0.3%
Year over Year 0.0% 0.1% 0.0%

The provisionally estimated 0.3 percent quarterly increase in total output in the first quarter was confirmed in the final data for the period. However, at 0.1 percent, annual growth was revised a tick firmer to show its first positive reading since the third quarter of 2011.

The major components of domestic demand painted a mixed picture. Hence, private consumption contracted 0.1 percent on the quarter but fixed investment jumped 1.5 percent as a 28.7 percent surge in transportation equipment and a 0.5 percent gain in construction more than offset a 0.9 percent drop in equipment and other products. Government spending edged 0.1 percent higher.

Net exports had a negative impact as export volumes were only flat while imports rose 1.4 percent.

Overall, the data suggest that the Italian economy is very gradually moving out of recession. Consumer and business surveys have pointed to an increase in total output in the second quarter but any rise is likely to be only modest at best.

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.