CH: Gross Domestic Product


Fri Aug 28 00:45:00 CDT 2015

Consensus Actual Previous Revised
GDP Q/Q (SA) -0.1 0.2 -0.2
GDP Y/Y (NSA) 0.9 1.2 1.1 1.2

Highlights
Expectations that the economy slipped into technical recession last quarter proved overly pessimistic. Rather, real GDP followed an unrevised 0.2 percent decline at the start of the year with a 0.2 percent increase that left annual growth unchanged at the first quarter's marginally stronger revised 1.2 percent.

Quarterly growth came courtesy of a 0.3 percent increase in household consumption together with a 1.5 percent rise in equipment and software investment. Construction investment edged 0.1 percent higher and general government consumption was up 0.2 percent. Inventories had a negative impact, with a 0.8 percent contraction after a 0.1 percent drop last time.

Meantime, exports held up surprisingly well. Hence, excluding valuables overseas sales of goods dipped just 0.2 percent while services expanded 0.9 percent. Imports of goods ex-valuables slumped 3.6 percent but services were up 3.0 percent.

Nonetheless, the unexpected buoyancy of the real economy was not matched in prices as the GDP deflator dropped some 1.1 percent on the year, steepening the 0.8 percent decline posted in the previous period.

Avoidance of recession may ease some of the pressure building on the SNB to push interest rates still further into negative territory but much will depend upon the performance of the Swiss franc. The minimum FX policy may have been abandoned in January but the central bank is clearly unhappy with what it regards as the local currency's significant overvaluation. Indeed, it is very likely that the monetary authority has already made the most of relatively thin summer markets to intervene to weaken the unit. Current levels against the euro are as low as they have been since January's dramatic appreciation.

Definition
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.

Description
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.