The economy rebounded surprisingly strongly to avoid falling into recession at the start of the year. Having contracted an unrevised quarterly 0.1 percent in the previous period, the first fall since the fourth quarter of 2020, real GDP expanded a solid 0.5 percent. This was more than double the market consensus and the strongest post since the second quarter of 2022. With base effects broadly neutral, annual growth climbed from 1.4 percent to 1.8 percent and total output was 2.4 percent above its pre-pandemic level at the end of 2019.

In terms of output, the only other information provided by Istat indicated that quarterly growth was attributable to gains in the goods producing and service sectors while agriculture, forestry and fishing was flat. From the demand side, both the domestic and overseas sectors made positive contributions.

Today's update is unexpectedly good news for the Italian economy and, indeed, for Eurozone GDP which now looks likely to exceed earlier market expectations. It also lifts the Italian ECDI-P (10) back into positive surprise territory although at minus 14, the ECDI continues to show a limited degree of overall underperformance due to weaker than anticipated inflation.

First quarter GDP is expected to 0.2 percent on the quarter and 1.4 percent on the year, the latter unchanged for the previous period's rate.

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.