Advance estimates for South Korean GDP show the economy remained weak in the three months to December. GDP rose just 0.1 percent on the quarter, matching the growth recorded in the three months to September, with year-over-year growth slowing from 1.5 percent to 1.2 percent. This is the slowest year-over-year growth in six quarters. PMI surveys also showed modest growth in South Korea's manufacturing sector in November, followed by renewed contraction in December, with monthly industrial production data showing weak growth.

This ongoing weakness in headline GDP growth in the three months to December reflects a sharp contraction in investment spending, down 0.9 percent on the quarter after previous growth of 0.2 percent. Consumption spending also slowed, up 0.3 percent on the quarter after advancing 0.5 percent previously. Exports rose 0.3 percent after falling 0.1 percent previously, while government consumption rose at a steady pace.

At their most recent policy meeting earlier this month, officials at the Bank of Korea left policy rates on hold at 3.25 percent. This decision partly reflected uncertainty about the economic outlook but officials also noted recent exchange rate volatility in response to"unexpected political risks" and"the changing domestic political situation" following last month's short-lived period of martial law. These factors appear to have convinced officials that policy should stay on hold for now, but they also signalled that further cuts will be considered in coming months to help mitigate downside risk to growth. Today's data will likely reinforce the case for further policy easing.

Forecasts look for GDP up 0.2 percent on the quarter and up 1.5 percent on the year in Q4 after a quarterly rise of 0.1 percent and an increase of 1.5 percent on year in Q3. Net exports made a positive contribution in the quarter, offsetting a weaker showing from consumption and the domestic economy. Consumption slowed at year end due to the national mourning period after the plane crash in late December.

GDP data are a comprehensive measure of South Korea’s overall production and consumption of goods and services. GDP serves as one of the primary measures of overall economic well-being. GDP calculates the total market value of goods and services produced in South Korea within a given period after deducting the cost of goods and services used up in the process of production. Therefore, GDP excludes intermediate goods and services and considers final aggregates only.

Gross domestic product (GDP) can be measured using three approaches, namely the production, income and expenditure approaches. The production measure of GDP is derived from firm level data and estimates the value added by all producing industries in the South Korea economy. The income measure of GDP is derived from earnings data and estimates how the income earned from these producing industries is then distributed throughout the economy as returns to labor, capital and government. The expenditure measure of GDP is derived from data estimating spending on goods and services by final end users and includes consumption, investment and exports minus the value of imports.

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.