The economy was a little stronger than originally reported at the start of the year with quarterly growth unexpectedly revised up a tick to 0.6 percent, its highest rate since the second quarter of 2022. With base effects broadly neutral, annual growth climbed from a marginally firmer revised 1.5 percent at year-end to 1.9 percent and total output was 2.5 percent above its pre-pandemic level at the end of 2019.

The quarterly advance was led by household and government consumption, which rose 0.5 percent and 1.2 percent respectively, and gross fixed capital formation which increased 0.8 percent. Investment in transport equipment (6.8 percent) was especially robust. Elsewhere, business inventories had a modest negative impact while both sides of the real trade balance sheet contracted as exports fell 1.4 percent and imports 1.0 percent.

Today's update shows that domestic demand was surprisingly firm last quarter and the buoyancy of investment was also a useful plus. However, with interest rates still rising, the current quarter is unlikely to be as good. The revised data put the Italian ECDI-P at 12 and the ECDI at 7. Both readings point to a limited degree of overall economic outperformance versus market expectations.

Quarterly growth is expected to be unrevised at a 0.5 percent.

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.