Wed Feb 28 01:45:00 CST 2018

Consensus Actual Previous
Quarter over Quarter 0.6% 0.6% 0.6%
Year over Year 2.4% 2.5% 2.3%

Quarterly economic growth was unrevised in the second look at the October-December national accounts. A 0.6 percent rise in real GDP matched the provisional reading but earlier revisions saw the annual rate of expansion nudged a tick firmer to 2.5 percent.

As indicated in the flash report, the quarterly increase in total output was driven by sizeable gains in both domestic final demand and net overseas trade. However, within the former, household spending was up just 0.2 percent, only a third of its third quarter pace, and government consumption eased from a 0.6 percent to a 0.3 percent rate. Still, gross fixed capital formation picked up from 0.9 percent to 1.2 percent with business investment gaining 1.6 percent after 1.1 percent. Inventory accumulation subtracted 0.4 percentage points which should bode well for output in the current period.

There was also a sizeable 0.6 percentage point boost from foreign trade as exports jumped 2.4 percent on the quarter while imports advanced just 0.3 percent.

The revised fourth quarter GDP data still suggest that the French economy is well placed to achieve another reasonably decent period of economic growth at the start of 2018. However, the slowdown in consumer spending could become an issue especially in the light of today's unexpectedly weak January report and business surveys have already hinted at some slowdown in activity rates. The first quarter could yet surprise on the downside.

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.