May 16, 2017 03:00 CDT

Consensus Actual Previous
Quarter over Quarter 0.2% 0.2% 0.2%
Year over Year 0.8% 1.0%

Economic growth remained disappointingly sluggish, albeit in line with expectations, at the start of the year. A provisional 0.2 percent quarterly rise in real GDP matched an unrevised fourth quarter gain but still saw the annual increase in total output slip from 1.0 percent to just 0.8 percent, equalling its slowest pace since July-September 2015.

On a modestly positive note, Istat at least indicated that what growth there was came from domestic demand as net foreign trade made a negative contribution. The only other information showed production falling in industry but expanding in services and agriculture.

April business surveys have tentatively pointed to better start to the current quarter but today's results provide little reason for expecting any narrowing in Italy's performance gap versus the other larger Eurozone states

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. A flash estimate, providing just quarterly and annual growth rates together with some limited qualitative information on sector output, is usually available 6-7 weeks 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.