|Quarter over Quarter||0.3%||0.3%||0.0%|
|Year over Year||1.1%||1.2%||1.0%|
The French economy performed much as expected last quarter according to the provisional national accounts. A 0.3 percent quarterly increase in total output followed unrevised stagnation in the previous period and put real GDP 1.2 percent above its level a year ago.
Final domestic demand contributed 0.3 percentage points to the quarterly change in total output as household consumption rose 0.3 percent after no change in April-June and general government current spending increased 0.4 percent. However gross fixed capital formation edged a minimal 0.1 percent higher and so only just reversed its second quarter drop. This reflected a 0.7 percent gain in business investment that offset yet another decline in housing (0.5 percent) and weaker government (minus 1.0 percent).
Headline growth would have been softer but for a sizeable 0.7 percentage point boost from inventory accumulation. Indeed, the risk here is that the jump will be, at least to some extent, at the expense of output in the current period.
That said, the fourth quarter is very unlikely to suffer so much at the hands of net foreign trade which, having boosted growth by 0.4 percentage points in the second quarter, subtracted some 0.7 percentage points this time. Exports were disappointingly soft, falling 0.6 percent, albeit following a near-2 percent jump last time, while imports continued to expand, this time up 1.7 percent.
There are not too many surprises in today's report. The economy is recovering but only slowly. The national central bank is currently forecasting growth of 0.4 percent for this quarter but business surveys have been more cautious. In any event, the increase in real GDP is unlikely to be large enough to provide inflation with a meaningful lift. The French economy would be more than happy with another monetary ease from the ECB next month.
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. In contrast to most flash releases, the French version provides an early look at the GDP expenditure components.
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.