| Consensus | Consensus Range | Actual | Previous | |
| Quarter over Quarter | 0.0% | 0.0% to 0.0% | -0.1% | 0.2% |
| Year over Year | 1.1% | 1.1% to 1.1% | 0.9% | 1.2% |
Highlights
Economic growth contracted in the first quarter, falling 0.1 percent, while increasing 0.9 percent compared to the first quarter of last year. The result is a weakening from the initial estimates for a 0.2 percent quarter-on-quarter gain and 1.1 percent year-on-year increase. The result is also below the consensus of an Econoday survey of economists' forecasts.
Foreign trade subtracted 0.9 percentage points from the overall first quarter result after having contributed 0.7 percent in the fourth quarter of last year. This came as exports contracted 3.5 percent, while imports showed a more modest 0.9 percent decline.
Conversely, inventories contributed 1.0 percentage points, likely coming from stock building in March resulting from the conflict in the Middle East. Business responded by accelerating production and padding inventories to help get ahead of expected higher prices and supply chain constraints.
Household spending fell for the first time since the first quarter of last year, down 0.2 percent, which comes as little surprise with consumers likely pulling back in the face of economic uncertainty. This is reflected in the purchasing power component of household disposable income which was flat on the month after being up 0.3 percent in the first quarter of last year.
Today's result shows a weakening economy despite the positive contribution from inventories. Continued restraint from consumers will also likely continue to weigh on growth. While growth was only marginally lower in the first quarter, the risk is that the economy could slip into a technical recession during the second quarter.
Market Consensus Before Announcement
No growth now expected on quarter.
Definition
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.
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.