The final GDP reading even higher than the flash estimate
In accordance with the final GUS reading, GDP growth rate rose to 4.9% YoY in Q3 vs. 4.0% in Q2 and thus stood above the flash estimate released earlier (4.7%). The annual GDP growth rate in Q3 was the highest since Q4 2011. Seasonally adjusted GDP growth rate rose from 4.3% in Q2 to 5.2% YoY, hitting the highest level since Q1 2011. Seasonally adjusted quarterly GDP growth rose to 1.2% in Q3 from 0.9% in Q2, which points to a slight acceleration of economic activity growth in Q3.
As we expected (see MACROpulse of 14/11/2017), the main factor behind the acceleration of GDP growth in Q3 was higher contribution of net exports (up from -1.3 pp in Q2 to 1.1 pp), resulting from a slowdown in imports growth to 5.7% YoY vs. 6.0% in Q2, given a simultaneous sharp increase in exports growth from 3.1% YoY to 7.6%. The acceleration in economic growth was also due to the recovery in investments (3.3% YoY vs. 0.9% in Q2). In our view, this recovery resulted mainly from sharp acceleration in investment outlays implemented by local government units, given stagnation of corporate investments.
Consumption slightly slowed down
Private consumption continued to grow fast in Q3 (4.8% YoY vs. 4.9% in Q2), supported by further improvement in the labour market, including faster growth of real corporate wage fund. The contribution of consumption to GDP growth in Q3 has not changed compared to Q2 and amounted to 2.9 pp. Thus, consumption continued to be the main driver of economic growth. The contribution of inventories to GDP growth was equal to zero and was the lowest since Q2 2016. In our view the contribution of inventories was surprisingly high in the light of signals pointing to their sell-off in companies and last year's high base effect.
Today's data on GDP do not alter our forecast of NBP interest rates (first hike by 25 bp in November 2018). These data indicate that the recovery in investments is much slower than assumed in the November NBP projection (ca. 6% YoY). Nevertheless, investors may interpret the better-than-expected GDP data as a signal of a growing likelihood of monetary tightening taking place sooner. Consequently, the GDP data are slightly positive for PLN and bond yields.
Today's GDP data pose a significant upside risk to our forecast of economic growth in 2017 (4.1%). We will present our revised medium-term macroeconomic scenario on 11 December.