| Actual | Previous | |
| Quarter over Quarter | 0.3% | 0.3% |
| Year over Year | 0.8% | 0.8% |
Highlights
The economy expanded 0.3 percent in the fourth quarter from the previous three-month period when it rose 0.1 percent. Compared to the fourth quarter of 2024, the economy expanded 0.8 percent, according to final figures. The result matched the preliminary reading from January.
Net foreign demand subtracted 0.7 percentage points from the overall result as exports sagged 1.2 percent while imports rose 1.0 percent. From their year ago levels, exports were up 1.9 percent with imports expanding 5.3 percent. At the same time, inventories contributed a positive 0.7 percent.
Spending was cautious during the fourth quarter, with final consumption expenditures up 0.1 percent from the previous quarter and 0.7 percent higher than a year ago. Consumers also increased their spending by 0.1 percent in the fourth quarter while government outlays were 0.2 percent higher.
Fixed capital formation was a bright spot, up 0.9 percent quarter-on-quarter and 5.1 percent year-on-year, led by a 7.1 percent investment increase for dwellings, translating into a 23.4 percent gain from the fourth quarter of 2024.
The question on inventories remains as to whether that stockpiling is the result of an economic slowdown or if business is anticipating additional work in the months ahead. Domestic demand excluding inventories contributed 0.3 percentage points to the overall GDP result. On balance, other indicators are showing that weak order intake is an issue among the major European economies.
Definition
Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. A flash estimate, providing just quarterly and annual growth rates together with some limited qualitative information on sector output, is usually available 6-7 weeks after the reference quarter.
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 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.