Economic growth was surprisingly robust in the second quarter. Following an unrevised 0.5 percent quarterly increase at the start of the year, GDP expanded fully 0.7 percent, a couple of ticks above the market consensus and its best performance since the second quarter of 2022. Annual growth was 1.8 percent, up sharply from an unrevised 0.6 percent last time.

However, robust headline growth masked a flat performance by final domestic demand. Household consumption rose 0.3 percent on the quarter and government consumption was up 0.2 percent but gross fixed capital formation fell 0.8 percent, its fourth decrease in the last five quarters. With equipment spending down a hefty 1.4 percent, overall investment ominously now stands at its lowest level since the second quarter of 2020. Inventory accumulation (and statistical discrepancies) also subtracted fully 2.5 percentage points.

Consequently, the overall picture would have been a good deal weaker but for a sharp improvement in the real trade balance which added some 3.2 percentage points. Even then, both sides of the balance sheet contracted with a 3.4 percent drop in exports easily more than offset by a 9.1 percent slump in imports.

As a result, the headline data flatter to deceive and should not stand in the way of another cut in the SNB policy rate later this month should the central bank see fit. That said, today's update at least lifts the Swiss RPI to 21 and the RPI-P to a solid 45, showing recent economic activity in general now running well ahead of market expectations.

Second-quarter GDP is expected to rise a quarterly 0.5 percent that would match stronger-than-expected expansion of 0.5 percent in the first quarter.

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.