Private consumption already on the rise, investments still low

Final data on GDP exceed flash estimate

In accordance with today’s GUS data, GDP growth in Q3 reached -1.5% YoY vs. -8.4% in Q2, thus slightly exceeding the flash estimate released earlier (-1.6%). Seasonally adjusted GDP increased in Q3 by 7.9% QoQ against a drop by 9.0% in Q2. This means that the seasonally adjusted GDP in Q3 was 2.1% lower than in Q4 2019, i.e. before the outbreak of the COVID-19 pandemic.

Consumption contributed to economic growth

Higher private consumption was the main factor behind higher GDP dynamics (by 6.4 pp. between Q2 and Q3). It increased by 0.4% YoY in Q3 vs. a drop by 10.8% in Q2. This came as a nice surprise since we had expected private consumption growth rate to remain still under zero in Q3. We owe the recovery in consumption to the subsidence of the first wave of COVID-19, the lifting of government restrictions and greater purchasing activity by households during the summer months. The scale of the positive impact of the removal of government restrictions on the economic activity is well illustrated by the significant increase in the growth of value added in the category of “accommodation and catering" (from -78.4% YoY in Q2 to -29.7% in Q3).

Investments also better than expected

In Q3, investment growth increased from -10.7% YoY in Q2 to -9.0% in Q3, which is also a positive surprise as we expected the decline in investments to deepen in annual terms. This surprise is most probably a result of corporate gross outlays (see today’s MACROmap). This assessment is supported by an increase in nominal investment growth of enterprises employing at least 50 people from -13.6% YoY in Q2 to -8.0% in Q3. On the other hand, based on data on the construction-assembly production for July-September, one can anticipate that the public investment growth dropped between Q2 and Q3.

Net exports support economic growth

The recovery of domestic demand contributed to an increase in imports growth to -1.0% YoY in Q3 vs. -18% in Q2. At the same time, the exports growth increased more (to +2.0% YoY in Q3 vs. -14.5% in Q2) thanks to revival of demand in Poland’s main trading partners and the restoration of supply chains. As a result, the net exports contribution increased to 1.7 pp. in Q3 from 1.1. pp. in Q2.

Slight upside risk for GDP forecast

GDP sub-indices in Q3 were above our forecasts. Coupled with better than expected October retail sales and production data, today’s figures signal a slight upside risk to our GDP growth forecast for 2020 (-3.1%). We will present our updated medium-term macroeconomic scenario taking into account the information we have received over the past weeks in the next MACROmap.

Today’s GDP figures are neutral for the zloty exchange rate and the yields of Polish bonds.