September 23, 2016 01:45 CDT

Consensus Actual Previous
Quarter over Quarter 0.0% -0.1% 0.0%
Year over Year 1.4% 1.3% 1.4%

The final look at the French national accounts for the second quarter showed a small downward revision that left total output 0.1 percent below its level in the previous period. Annual growth was also shaded a tick and now stands at 1.3 percent.

The minor, but still disappointing, adjustment to the headline data reflected weaker household spending which now posts a 0.1 percent quarterly contraction versus the originally reported flat performance. Elsewhere, business capital investment was unrevised at minus 0.4 percent and government consumption still rises 0.4 percent. Domestic final sales were unchanged over the period and stocks still subtract 0.7 percentage points.

Accordingly, despite some further revisions to exports (0.2 percent) and imports (minus 1.8 percent), the external balance continues to contribute a much needed 0.6 percentage points to quarterly growth.

The second quarter figures are too historic to be of much relevance to the economy this quarter. Even so, the negative revision to consumer demand is a worry and such a large contribution from net external trade is unlikely to be repeated. Stocks should make less of a negative impact but all in all prospects for third economic growth now look a little worse.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Following the release of the flash estimate about four weeks earlier, the second report incorporates additional data to provide a more accurate reading. This is also revised in the final report, published in the third month after the reference quarter.

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.