Not for the first time in recent quarters, the Italian economy held up rather better than expected at the start of 2024. GDP provisionally expanded a quarterly 0.3 percent, well above the market consensus although following a smaller revised 0.1 percent increase in the previous period. However, negative base effect saw annual growth dip from a revised 0.7 percent to 0.6 percent.

In terms of output, the only other information provided by Istat indicated that quarterly growth was attributable to gains in goods production, services and agriculture, forestry and fishing. However, domestic demand subtracted leaving the expansion dependent upon a positive impact from net exports.

Today's update boosts the Italian RPI to minus 18 and the RPI-P to minus 5. In other words, modestly undershooting overall economic activity essentially just reflects the surprising weakness of prices.

First-quarter GDP is expected to expand 0.1 percent on the quarter and 0.4 percent on the year versus a 0.6 percent yearly increase in the fourth quarter.

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.