The latest GDP flash estimate signals a stall in economic momentum in the euro area, with seasonally adjusted GDP remaining flat in the fourth quarter of 2024, following a 0.4 percent expansion in the third quarter. This update, about 0.2 percentage points below the consensus, suggests that growth drivers may be losing momentum, potentially due to uncertainties.

However, on a year-over-year basis, GDP still managed a 0.9 percent increase, matching the third quarter's performance and just 0.1 percent below the consensus forecast. This stability implies that while short-term momentum has softened, the broader economic trajectory remains positive, supported by resilient consumer spending and investments. The stagnation in the fourth quarter could signal headwinds for 2025, particularly if high interest rates, inflationary pressures, or global trade frictions persist.

Moving forward, policymakers will likely assess the need for supportive fiscal or monetary measures to prevent stagnation from turning into contraction, while businesses and investors may need to adjust strategies to navigate an increasingly uncertain economic landscape. This latest update takes the RPI-to minus 4 and the RPI-P to minus 2. This means that economic activities are generally in line with expectations within the area.

The consensus view is the economy slowed headed in Q4 with a very modest 0.2 percent rise on the quarter and 1.0 percent on year. That compares with 0.4 percent on quarter and 0.9 percent on year in Q3.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. There are two preliminary estimates which are based on only partial data. The first is the preliminary flash, introduced in April 2016 and limited to just quarterly and annual growth statistics for the region as a whole. This is issued close to the end of the month immediately after the reference period. The second flash report, released about two weeks later, expands on the first to include growth figures for most member states but still provides no information on 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.