The GDP Lightning Round

Quick hits on GDP reports around the world.

Get ready GDP fans-we have a data deluge for you! Though these backward-looking numbers say nothing about future economic growth, they're still relevant. The media's reporting shows the prevailing sentiment towards the global economy-useful information for investors. Here are some recent GDP reports, what the media is saying and how, in our view, an investor can best make sense of it all.

Note: All GDP figures are for Q4 unless otherwise noted.

Eurozone (19-member bloc): 0.4% q/q (second estimate), slower than preliminary estimate of 0.5%

Media's Take: Growth has been stronger than expected, but analysts worry about Brexit-implications; potential fallout from upcoming elections in the Netherlands, France and Germany; and rising energy prices, among others.

MarketMinder's Take: We're bullish on the eurozone. One major reason: falling political uncertainty. While concerns about anti-euro pols have stirred fears and a little volatility, some bumpiness before an election isn't abnormal. Uncertainty may weigh now, but markets are already pricing in the Dutch elections in March, France's presidential contest in April/May (along with June's parliamentary elections) and Germany's federal election in September. Similar to last year's Brexit referendum and the US presidential election, just knowing the outcomes, regardless of who wins, will let investors move on and focus their attention elsewhere-like the eurozone's overlooked growth streak. Overall, the bloc has been doing better than appreciated, and falling uncertainty should help more folks recognize it.

Germany: 0.4% q/q (1.8% y/y)

Media's Take: GDP picked up in Q4, but most pundits focused on the country's record-high 2016 trade surplus-especially after the White House publicly criticized Germany for purposely weakening the euro to boost exports.

MarketMinder's Take: Many discussions about Germany center on its trade surplus. However, for those who believe a trade surplus (more exports than imports) is a great positive and a trade deficit (more imports than exports) an anathema, consider: Germany had a record-high trade surplus and grew 1.8% in 2016. Sounds good! But the UK had a supposedly yuuuuge trade deficit (£39.4 billion, or 8% of GDP) last year, yet grew 2.0%-faster than the major net exporter. Fun Friday fact: The US has had a trade deficit for 41 years, yet US stocks and economy have done just fine-so clearly, trade alone doesn't dictate economic prowess. Plus, Q4 German GDP accelerated from Q3 (0.1% to 0.4%) despite net trade's detraction, as imports outpaced exports. Though higher imports detract from GDP, they also mean domestic demand is up-a positive! While trade rhetoric drives the headlines, the numbers show a more benign reality.

Select Eurozone Countries

Other reporting euro members also grew, save one.

  • Italy: 0.2% q/q (1.1% y/y)
  • Portugal: 0.6% q/q (1.9% y/y)
  • Netherlands: 0.5% q/q (2.7% y/y)
  • Greece: -0.4% q/q (0.2% y/y)[i]

We aren't going to dive into specifics for each country, but Greece aside, growth is broad-based-a long underappreciated positive. As for Greece, the GDP contraction only fans the flames of the latest bailout/austerity standoff, which markets are brushing off.

Japan: 0.2% q/q, 1.0% annualized

Media's Take: Japan has now grown four straight quarters but remains dependent on exports-if trade relations with US get damaged, growth may suffer.

MarketMinder's Take: Japan's meager growth remains externally driven, as domestic demand is still tepid. However, sentiment toward Japan has been falling, and murmurs about rocky trade relations with the US could spook some investors into thinking Japan's only growth driver is at risk. This could significantly lower expectations toward the country, to the point that any positive news could surprise to the upside-something for globally minded investors to consider, as markets move on the gap between reality and expectations.

Norway: 1.1% q/q, 4.5% annualized

Media's Take: The oil-reliant economy broke out of its recent slump and GDP remains in line with central bank expectations.

MarketMinder's Take: This first estimate provides few details, but non-oil GDP grew only 0.3% q/q, so an oil rebound was indeed the primary contributor. While Norway's economy probably remains dependent on oil prices, rising Norwegian oil output is another pressure on global supply, likely keeping a lid on prices.

Eastern Europe

  • Czech Republic: 0.2% q/q (1.7% y/y)
  • Hungary: 0.4% q/q (1.6% y/y)
  • Poland: 1.7% q/q (2.7% y/y)
  • Romania: 4.7% y/y

Media's Take: Hey, some Eastern European countries grew, how about that?

MarketMinder's Take: For investors with Emerging Markets (Czech Republic, Hungary, Poland) or Frontier Markets (Romania) exposure, Eastern Europe is worth monitoring. These EU members' economies have been chugging along, and as uncertainty falls in Western Europe, Eastern Europe may benefit from that sentiment boost, too, as their solid growth becomes more visible.


  • Indonesia: 4.9% y/y
  • Taiwan: 2.9% y/y
  • Malaysia: 4.5% y/y

Media Take: Indonesia just missed expectations of 5.0% growth, and there is growing concern reform is slowing down. Taiwan grew at its fastest pace in almost two years, but deteriorating trade developments may hurt its export-driven growth. The private sector drove Malaysian GDP, but growth expectations for 2017 are muted.

MarketMinder's Take: For Indonesia, government spending (-4.0%) drove the miss, though this is more a function of math. Q4 2015 was up big, setting up a tough year-over-year comparison. However, quarter-over-quarter, government spending rose nicely, and with fixed investment up 4.8%, President Joko Widodo's big infrastructure spend is still aiding growth. Plus, private consumption (5.0%) remains steady-a sign of solid domestic demand.

In general, broad sentiment toward Emerging Markets (EM) has been dour, as most investors tend to treat the category as one cohesive bloc. But they aren't-EMs include commodity-dependent economies (e.g., Brazil and South Africa), more advanced countries with solid services sectors (e.g., South Korea and Taiwan) and blends of both (e.g., Mexico and Malaysia). For investors with EM exposure, there are opportunities in overlooked areas growing at a solid clip.

While sentiment about the US economy has been picking up recently, it still remains down around the rest of the world. However, we expect this to pick up, especially in Western Europe as political uncertainty passes in the form of several major elections. As investors realize the world is actually doing much better than commonly believed, we believe they'll bid stocks higher and continue to fuel the almost eight-year old bull market.

[i] If you had to guess any country in the 19-member bloc contracted, shouldn't Greece be your default (tee hee) choice?

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.