The economy began the year on a surprisingly firm footing. Following an unrevised 0.3 percent quarterly increase at the end of 2023, GDP expanded fully 0.5 percent, a couple of ticks above the market consensus and its best performance since the second quarter of 2022. Annual growth was 0.6 percent, up from a slightly weaker revised 0.5 percent.

Headline growth reflected a 0.4 percent quarterly advance in private consumption and a 0.5 percent rise in gross fixed capital formation. Within the latter, a 0.8 percent increase in equipment and software investment more than offset a 0.2 percent fall in construction. Government consumption was up 0.2 percent making for a 0.4 percent rise in final domestic demand but by far and way the largest positive impact came from business inventories (and statistical discrepancies) which added some 2.1 percentage points.

Meantime, the trade balance subtracted 1.2 percentage points as a 3.2 percent increase in exports was easily eclipsed by a 5.9 percent spurt in imports, itself led by an 8.2 percent jump in purchases of goods.

Consequently, the underlying picture is rather softer than the headline data might suggest. Final domestic demand is expanding but at a modest pace and the sharp rise in inventories could dampen growth this quarter. The first quarter data will leave investors uncertain about what the SNB will announce at June's Monetary Policy Assessment (MPA). Today's updates lift the Swiss RPI to 11 and the RPI-P to minus 8. Overall economic activity is running just marginally ahead of forecasts but only due to upside surprises from inflation.

First quarter GDP is expected to rise a quarterly 0.3 percent, matching the fourth quarter rate.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. There is no flash estimate and the first report is typically not issued until around sixty days after the end of the reference quarter. This has the advantage of limiting the size of any future revision and also accommodates the inclusion of 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. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.

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. 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.