Economic growth picked up in the third quarter, expanding 0.5 percent quarter-on-quarter, following 0.3 percent growth in the second. Compared to the same quarter a year ago, the economy grew 0.9 percent.

Exports were up 3.2 percent during the reporting quarter, boosted by transportation equipment, after a tepid second quarter in which they grew 0.3 percent. Import growth slowed modestly in the third quarter to 1.3 percent from 1.5 percent in the second. Net trade contributed 0.6 percent growth. At the same time, inventories were a drag, subtracting 0.4 percent from the expansion.

Excluding inventories, there was an uptick in domestic demand in the third quarter, which contributed 0.3 percent to overall growth after 0.2 percent in the second quarter.

Household continue to remain cautious, with spending up a marginal 0.1 percent in the third quarter, thereby matching the second quarter pace. Although consumers spent 1.0 percent less on food products, they shelled out 1.3 percent more on energy in the third quarter, a sharp reversal from the 2.3 percent decline in the second quarter.

The data suggest that consumers are dipping into savings to fund their spending, with the household savings rate falling to 18.4 percent in the quarter after 18.7 percent in the second. Conversely, government expenditures were higher, growing 0.5 percent in the second and third quarters.

Today's results show the economy is on mildly solid footing, with increased domestic demand encouraging. Exports were also a positive sign, but it remains to be seen if there is robustness beyond the transportation sector.

The consensus sees no revision from the flash with increases of 0.5 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. Following the release of the flash estimate about four weeks earlier, the second report incorporates additional data to provide a more accurate reading. This is also revised in the final report, published in the third month after the reference quarter.

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 anemic 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.