The economy failed to keep its head above water at the end of 2022. A disappointing provisional 0.2 percent quarterly contraction followed a slightly stronger revised 0.5 percent gain in the previous period and reduced annual workday adjusted growth from 1.4 percent to 1.1 percent. This was the first time that total output has fallen since the first quarter of 2021 and also the weakest yearly growth since that date. Unadjusted, the annual rate was 0.5 percent, down from 1.3 percent.

As usual, no GDP expenditure components were released in the flash estimate but the FSO did indicate that the quarterly change was depressed by a decline in household consumption. It also pointed out that due to the pandemic and the impact of the war in Ukraine, the latest results are subject to high levels of uncertainty. This means that revisions could be more significant than usual.

Still, as they stand, the fourth quarter results boost the chances of a German recession and make for downside risk to tomorrow's Eurozone report. They also trim the German ECDI to 4 and the ECDI-P to minus 5. Both readings suggest that economic activity in general is currently moving broadly in line with market expectations.

The flash estimate for fourth-quarter GDP is no change on the quarter for year-over-year growth of 1.3 percent versus 1.2 percent in the third quarter.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The provisional or flash estimate is normally released in the second week of the second month after the reference quarter. This is based on only limited data and provides just quarterly and annual growth rates and a limited qualitative guide to how the major output sectors performed.

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.