| Consensus | Consensus Range | Actual | Previous | |
| Quarter over Quarter | 0.2% | 0.1% to 0.2% | 0.2% | 0.5% |
| Year over Year | 1.2% | 1.1% to 1.2% | 1.1% | 0.9% |
Highlights
Economic growth slowed in the fourth quarter, weighed down by a negative contribution from inventories. The economy expanded 0.2 percent during the final three months of last year, down from 0.5 percent growth in the third quarter. Compared to the same quarter of 2024, growth was up 1.1 percent. For the whole year, the economy grew 0.9 percent.
The result was in-line with the median of an Econoday survey of economists' forecasts which called for 0.2 percent quarter-on-quarter growth and 1.2 percent year-on-year.
Inventory changes contributed minus 1.0 percent to overall GDP during the fourth quarter. Companies have been working off inventories in order to maintain production lines. This suggests that demand remains weak. That contraction was almost completely offset by a 0.9 percent contribution from net trade. Imports fell 1.7 percent during the fourth quarter compared with a 1.5 percent increase during the third.
On the positive side, household spending increased by 0.3 percent from 0.1 percent in the third quarter. The highest outlays were on energy, up 0.8 percent quarter-on-quarter, and 0.5 percent for manufactured goods. Last year, consumers increased their spending by 0.4 percent compared to 1.0 percent in 2024. This underscores one of the main challenges facing the economy. Absent more robust consumer spending, growth will continue to muddle along.
There is no concealing the economy is struggling as seen by the inventory and imports components. Taken together, they still point towards weak demand.
Market Consensus Before Announcement
The consensus looks for increases of 0.2 percent on quarter and 1.2 percent on year for Q4 after 0.5 percent on quarter and 0.9 percent on year in Q3.
Definition
Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The flash estimate, released a relatively short 4-5 weeks after the end of the reference quarter, is an effort to speed up delivery of key economic data. In contrast to most European flash releases, the French version provides an early look at the GDP expenditure components.
Description
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.