France's GDP growth accelerated modestly in the third quarter, increasing from 0.2 percent in the second quarter to 0.4 percent, within consensus range and largely due to the Paris Olympic and Paralympic Games. This increase was primarily fuelled by a 0.5 percent increase in household consumption, which contrasted with the stagnation of the previous quarter. Nevertheless, gross fixed capital formation continues to decline at minus 0.8 percent, indicating that investment remains weak.

Domestic demand (excluding inventories) contributed 0.2 percentage points to GDP growth, tripling its contribution in the second quarter. This suggests a gradual recovery in local economic activity. In contrast, foreign trade had a lesser positive impact of 0.1 point, as imports contracted faster than exports, alleviating trade pressures. Inventories provided a modest buffer to overall growth, contributing a marginal 0.1 points an increase from zero in the previous quarter.

While positive, the growth pattern of last quarter indicates only a tentative recovery. This recovery is primarily supported by event-driven consumption but is tempered by persistent investment instability and marginal trade and inventory contributions. Today's report puts the French RPI at minus 3 and RPI-P at zero, showing overall economic activity moving in line with market forecasts.

Forecasters expect decent 0.4 percent growth in the third quarter from the prior quarter.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The flash estimate, released a relatively short 4-5 weeks after the end of the reference quarter, is an effort to speed up delivery of key economic data. In contrast to most European flash releases, the French version provides an early look at 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. 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 anaemic 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.