Fri Dec 22 01:45:00 CST 2017

Consensus Actual Previous
Quarter over Quarter 0.5% 0.6% 0.5%
Year over Year 2.2% 2.3% 2.2%

Economic growth was unexpectedly revised a little stronger last quarter. At 0.6 percent and 2.3 percent respectively, both the quarterly and annual rates were a tick above their November estimates.

The minor adjustment reflected just small changes to some of the GDP expenditure components (mainly government spending) and the key household consumption category still shows a 0.6 percent quarterly gain. Final domestic demand now prints a 0.6 percent increase while the impact of both inventory accumulation (0.5 percentage points) and net exports (minus 0.6 percentage points) remains unchanged.

The minor revisions leave intact a solid third quarter performance by the French economy with a composition that also bodes well for the current period.

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.