Advance estimates for South Korean GDP show the economy grew at a stronger pace in the three months to September, extending the recovery from contraction at the start of the year. GDP rose 1.2 percent on the quarter after an increase of 0.7 percent previously, with year-over-year growth accelerating from 0.6 percent to 1.7 percent. PMI surveys showed contraction in the manufacturing sector in the first two months of the quarter before renewed expansion in September.

The Bank of Korea left its main policy rate on hold at 2.50 percent at its policy meeting last week. Despite steady underlying inflation and uncertainty about the impact of global trade tensions on the growth outlook, officials remain cautious about house price growth in the Seoul area and higher household debt. Although they reiterated that they have a rate cut stance, officials again stressed that they will adjust the timing and pace of any further rate cuts based on incoming data.

Growth seen improving somewhat to 0.9 percent on the quarter and a still-sluggish 1.4 percent on year in Q3 after rising by 0.7 percent on quarter and 0.6 percent on the year in Q2.

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.