Annual growth surprisingly held steady at 7.5 percent in the first quarter. The outcome was at the stronger end of market expectations.
With CPI inflation having slipped to a 4-month low of 4.9 percent in April and its WPI counterpart deep into deflation territory at minus 2.7 percent, the latest developments had already opened the door to a possible RBI cut next week. Despite today's slightly firmer than expected national accounts, speculation will still be rife about an imminent easing of policy. A soft May manufacturing PMI on Monday could be the deciding factor.
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The GDP report paints an image of the overall economy and tells investors about important trends within the big picture.
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 paints an image of the overall economy and tells investors about important trends within the big picture.
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.
The quarterly national accounts series are not published in seasonally adjusted form. The publications contain growth rates in comparison with the corresponding quarter of the previous year. The Quarterly Gross Domestic Product (QGDP) estimates are now released by the CSO on the last working day after two months of the end of a quarter. Data are for the prior quarter. Data released on February 28, 2013 are for the fourth quarter 2012.
To the extent that it was feasible, the accounts implemented the recommendations of the System of National Accounts (SNA), 1993 and 2008 prepared under the auspices of the Inter Secretariat Working Group on National Accounts comprising of the European Communities (EUROSTAT), International Monetary Fund (IMF), Organisation for Economic Cooperation and Development (OECD) United Nations and the World Bank.
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