The French economy managed to eke out modest growth in the third quarter, according to preliminary data, defying the rather gloomy data released over the past several weeks.

Gross domestic product expanded by 0.1 percent, in line with market expectations, but down sharply from the upwardly revised 0.6 percent pace set in the second quarter. However annual growth slowed to 0.7 percent from an upwardly revised 1.1 percent previously.

The weak but positive third quarter growth came despite a perky 0.7 percent jump in household consumption after a flat performance in the previous period, although second quarter consumption was revised upward from the initially reported 0.4 percent decline.

Gross fixed capital formation increased by 1.0 percent, but that gain was concentrated in the business sector; household GFCF rose by just 0.1 percent. Inventory changes added 0.7 percentage points to the third quarter outcome, but that was nearly wiped out by a 0.6 percentage point drag from net exports. That's a turnaround from the second quarter, when foreign trade accounted for a large portion of the perkier headline growth.

While the GDP data matched the unambitious consensus forecast, they do outperform the picture painted by recent PMI data; composite PMIs were well below the break-even level of 50 in each month of the quarter, falling as low as 44.1 in September.

The latest data put the French RPI at 14 and the RPI-P at 17, meaning that overall economic activity is performing just marginally better than market expectations.

The French data will feed into flash Eurozone output data due later Tuesday. European Central Bank Vice President Luis de Guindos repeated the company line on Monday that the risks to growth are tilted to the downside adding to the sense that European interest rates are unlikely to rise further.

Third-quarter GDP in France is expected to rise a minimal 0.1 percent on the quarter versus 0.5 percent growth in the second quarter.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The flash estimate, released a relatively short 4-5 weeks after the end of the reference quarter, is an effort to speed up delivery of key economic data. In contrast to most European flash releases, the French version provides an early look at the GDP expenditure components.

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.