| Consensus | Consensus Range | Actual | Previous | Revised | |
| Quarter over Quarter | 0.2% | 0.1% to 0.2% | 0.2% | 0.2% | |
| Year over Year | 1.1% | 1.1% | 1.3% |
Highlights
Economic growth stalled in the first quarter after having increased 0.2 percent during the final three months of last year, primarily due to a negative contribution from trade, according to preliminary results. Compared to the first quarter of last year, GDP was 1.1 percent higher.
Exports contracted 3.8 percent in the first quarter from the fourth, the sharpest contraction since at least the first quarter of 2024. Imports fell 1.7 percent during the same period after a 0.8 percent contraction the previous quarter, and shows sagging demand. The net result of trade on the overall result was to subtract 0.7 percent, the biggest contraction since the third quarter of 2023 when it declined by the same amount.
Conversely, inventories contributed 0.8 percentage points after a contraction of 0.7 percent in the fourth quarter. This likely came mostly in March when the war in the Middle East broke out as companies rushed to build inventories to get ahead of supply constraints and price increases.
Household spending fell 0.1 percent quarter-on-quarter, the first decline since the first quarter of last year, and will likely persist into the second quarter with the situation in the Middle East. Government spending on the other had rose 0.4 percent in the first quarter, matching the fourth quarter result.
Trade will likely continue to he a drag in the second quarter with the conflict entering its third month as energy supplies continue to be pressured. The ancillary effects are less and more expensive fertilizer, and higher transportation costs. Inventories will likely contribute positively as the buildup continues in the second quarter. Paradoxically, while inventories are increasing, the reason they are is, on balance, negative.
Market Consensus Before Announcement
Growth expected to continue at modest 0.2 percent rate in Q1.
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.