The Italian economy held up a good deal better than expected at the end of 2023. GDP provisionally expanded a quarterly 0.2 percent, well above the market consensus and its strongest gain since the first quarter of the year. Following an unrevised 0.1 percent increase in the previous period, this lifted annual growth from also 0.1 percent to 0.5 percent.

In terms of output, the only other information provided by Istat indicated that quarterly growth was attributable to gains in both the goods producing and service sectors. Advances here more than offset a decline in agriculture, forestry and fishing. However, domestic demand subtracted leaving the expansion dependent upon a positive impact from net exports.

Today's update means that the Italian economy will begin 2024 on a rather firmer footing than previously expected. Indeed, the data boost the Italian RPI to 4 and the RPI-P to 19. Still, domestic demand remains soft so unless global activity continues to provide support, the first quarter could yet disappoint.

Fourth quarter GDP is expected to be unchanged on the quarter but rise 0.3 percent on the year. GDP in the third quarter edged 0.1 percent higher both on the quarter and on the year.

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.