|Quarter over Quarter||0.4%||0.4%||0.2%|
|Year over Year||1.1%||1.1%||1.1%||0.9%|
The economy picked up some much-needed momentum at the end of 2016. Real GDP provisionally expanded 0.4 percent versus the third quarter when it expanded an unrevised 0.2 percent to nudge annual growth a couple of ticks firmer at 1.1 percent. The outturn was in line with market expectations.
Promisingly, the principal boost to total output came from domestic final sales which were up a quarterly 0.6 percent following a sluggish 0.2 percent rate last time. Private consumption matched this increase and gross fixed capital formation (0.8 percent) did even better as business investment advanced 1.3 percent and households 0.9 percent. However, general government investment fell 1.1 percent. Government consumption expenditure was a tick firmer at 0.4 percent but inventory accumulation subtracted 0.2 percentage points.
Meantime, net external demand added just 0.1 percentage points having hit growth by a full 0.7 percentage points in July-September. Exports were up a solid 1.1 percent while imports rose a smaller 0.8 percent.
Overall today's results are in line with a better balance to the French economic recovery. Not only are households starting to spend more freely again but investment is also finally starting to gain ground. January looks likely to prove a decent month for output too but with unemployment still uncomfortably and high and elections just around the corner, a strong first quarter is far from guaranteed.
Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The flash estimate, released a relatively short 4-5 weeks after the end of the reference quarter, is an effort to speed up delivery of key economic data. In contrast to most European 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.