|Quarter over Quarter||0.0%||0.0%||0.6%|
|Year over Year||1.0%||1.1%||0.8%|
Quarterly economic growth was unrevised in the second estimate of real GDP in the period just ended. Total output remains unchanged from its first quarter level, although with the quarterly rate in January-March now put a tick firmer at 0.7 percent, the annual rise was revised 0.1 percentage points higher to 1.1 percent.
The quarterly rate of household spending was shaded a tick lower to zero but gross fixed capital formation was nudged marginally stronger to minus 0.2 percent on the back of small positive changes to both household and business investment. Government consumption was also 0.1 percentage points stronger at 0.4 percent. As a result, final domestic demand still added just 0.1 percentage points to the quarterly change in total output. The inventory contribution (minus 0.5 percentage points) was revised a little more negative.
Meantime, quarterly export growth was raised 0.3 percentage points to 2.0 percent while imports were trimmed fractionally to a 0.5 percent rate. This left net exports adding 0.4 percentage points to overall growth, just 0.1 percentage points more than previously reported.
The changes to the second quarter national accounts are too small to be of any real significance. The French economic recovery stalled then and the third quarter does not look to be shaping up much better.
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.
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