Advance estimates for South Korean GDP show the economy contracted in the three months to March. This follows very weak growth in the previous two quarters and contraction three quarters previously. GDP fell 0.2 percent on the quarter after increasing just 0.1 percent previously, with year-over-year growth slowing from growth of 1.2 percent to a fall of 0.1 percent. PMI surveys also showed contraction in the manufacturing sector over this period.

The fall in headline GDP in the three months to March was broad based across all major expenditure components. Private consumption spending weakened, down 0.1 percent on the quarter after advancing 0.2 percent previously, and there was a sharper contraction in investment spending, down 2.0 percent on the quarter after a previous fall of 1.6 percent. Exports fell 1.1 percent after increasing 0.8 percent previously, while government consumption fell 0.1 percent after a previous increase of 0.7 percent.

At their most recent policy meeting earlier this month, officials at the Bank of Korea left policy rates on hold at 2.75 percent after cutting rates in three of their previous four meetings. This decision partly reflected uncertainty about the impact of the recent escalation in global trade tensions and associated market volatility. Officials retained their forecast for GDP growth to slow to around 1.5 percent this year but noted that uncertainty about the outlook has increased, largely reflecting global trade tensions. Today's data will likely reinforce the case for further policy easing.

Growth on year is seen at a marginal 0.1 percent in Q1, down from 1.2 percent in Q4. The trade war, exchange rate volatility, and political turmoil are being felt.

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.