DE: GDP Flash

Fri Aug 14 01:00:00 CDT 2015

Consensus Actual Previous
Quarter over Quarter 0.5% 0.4% 0.3%
Year over Year 1.5% 1.6% 1.0%

The economy expanded for a fourth consecutive quarter in the period just ended. However, a 0.4 percent increase in total output was only 0.1 percentage point higher than the first quarter. However, annual workday adjusted growth increased 1.6 percent after 1.1 percent in the first quarter. Unadjusted, the yearly rise in real GDP also was 1.6 percent.

In the absence of any details on the expenditure components the FSO pointed out that the increase in output came about as a result of increased exports. In a quarter-on-quarter comparison (adjusted for price, seasonal and calendar variations), positive contributions were made mainly by the balance of exports and imports.

According to provisional calculations, exports increased much more than imports thanks to the weak euro. Exports of goods recorded a particular increase compared with the previous quarter. Both household final consumption expenditure and government final consumption expenditure continued to develop positively. However, growth was slowed by weak gross fixed capital formation. Compared with the first quarter, a decline in fixed capital formation was recorded especially in construction. Also, inventories were markedly reduced.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The flash estimate, which will be released about 45 days after the quarter's end, is an effort to speed up delivery of key economic data. No figures on the GDP expenditure components are available in the flash estimate although some qualitative information is usually provided.

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 anaemic 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.