Surprisingly weak Q3 GDP reading

In accordance with the today's GUS reading, GDP growth rate in Q3 amounted to 2.5% YoY vs. 3.1% in Q2 and thus was markedly below our forecast (2.8%) and the market consensus (2.9%). Seasonally adjusted GDP rose by 0.2% QoQ in Q3 vs. 0.8% in Q2. Contrary to our expectations GUS did not publish the revised GDP dynamics in individual quarters of 2015 and H1 2016 (resulting from the revision of annual national accounts performed last month). The Q3 GDP reading released today is a flash estimate, consistent with the data from previous quarters. Full GDP data in Q1 2015 – Q3 2016 (including information about its structure), which will be released towards the end of November, will be altered compared to today's figures.

In our opinion, the main factor conductive to GDP slowdown in Q3 was lower contribution of net exports. Be believe that private consumption and investments were, on the other hand, contributing to acceleration of economic growth in Q3. However, the positive scale of this influence was probably smaller than we previously expected. In our opinion, the proceeds from Family 500+ scheme and further improvement of situation on the labour market contributed to a marked acceleration of private consumption. We also believe that public investments dynamics bottomed out, and at the same time the gross fixed capital formation growth rate increased, which resulted in higher contribution of total investments.

Today's GDP data pose a significant downside risk to our economic growth rate forecast in 2016 (2.9%). We will present our updated 2016-2017 forecasts on December 12, after the release of revised GDP data. Today's GDP reading, lower from the market consensus, is slightly negative for PLN and positive for Polish debt prices.