Australia's GDP expanded 0.2 percent on the quarter in the three months to September, down from the 0.4 percent increase recorded in the three months to March. This is the weakest quarterly growth in four quarters and was also below the consensus forecast for an increase of 0.4 percent. GDP rose 2.1 percent on the year in the three months to September, up slightly from 2.0 percent in the three months to June, and extending the steady growth that has been seen in the last four quarters.

Weaker quarter-over-quarter headline growth reflects mixed results across key expenditure categories. Consumer spending was flat on the quarter in the three months to September, weakening from an increase of 0.2 percent in the three months to June. Net trade made a negative contribution to headline GDP growth of 0.6 percentage points after a positive contribution of 0.8 percentage points previously. Private investment, however, recorded stronger growth, increasing 1.2 percent after advancing 0.6 percent previously, with growth in government spending also picking up from 0.6 percent to 1.1 percent.

Today's data cover the period in which officials at the Reserve Bank of Australia left policy rates on hold after increasing them aggressively over the previous twelve months. At their latest meeting, held earlier this week, officials left rates on hold again after increasing them in November. Today's data showing weaker growth suggests that previous policy tightening has contributed to slower demand and likely boosts the chances that officials will leave rates on hold again at their next meeting in February.

Third-quarter GDP is expected to rise a quarterly 0.4 percent for year-over-year expansion of 1.8 percent. Second-quarter respective results were growth of 0.4 and 2.1 percent benefiting from strong exports offset by modest consumer spending and slowing private investment.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy and is usually released early in the third month after the reference period.

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 a treasure-trove of 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, and price (inflation) indexes 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.