GDP dynamics above the flash reading
In accordance with the GUS data published today, GDP growth rate stood at 4.5% YoY in Q2 vs. 4.7% in Q1, running above the flash estimate that was released earlier (4.4%). Seasonally-adjusted GDP rose by 0.8% QoQ in Q2 vs. a 1.4% increase in Q1.
Downturn abroad slowed down economic growth
Q2 recorded a significant decrease in the contribution of net exports to GDP growth (from 0.9 pp in Q1 down to 0.0 pp in Q2), which resulted from lower exports dynamics given smaller slowdown of imports growth. Conducive to lower growth rate of the two indices was the last year’s high base effect. The slowdown of exports was additionally intensified by the downturn in Poland’s main trade partners. However, it should be pointed out that such a strong slowdown of exports and imports is somewhat surprising as it was not signaled by the GUS and the NBP data on foreign trade.
Conducive to the slowdown of economic growth was also lower contribution of public consumption (down by 0.5 pp between Q1 and Q2) resulting i.a. from the last year’s high base effect.
Recovery in investments is abating
Investments have contributed to the slowdown of economic growth. Their dynamics dropped to 9.0% YoY in Q2 vs. 12.6% YoY in Q1. Based on the construction-assembly production data for the April-June period, public investments dynamics can be expected to have decreased in Q2. This view is also supported by a decrease in the dynamics of investments of local government units to 9.6% YoY in Q2 vs. 33.8% in Q1 (the end of the investment peak due to municipal elections). We believe that the deceleration in investment outlays resulted also from slower growth of corporate investments. This view is supported by lower dynamics of investments of companies employing at least 50 persons in Q2 (see MACROmap of 26/8/2019).
Inventories and consumption as the driver of economic growth
The main factor boosting GDP growth in Q2 was higher contribution of inventories (-0.1 pp vs. -1.1 pp in Q1). On the one hand, it was the result of statistical effects (the abatement of increased base from Q1 2018) and, on the other hand, the higher contribution of inventories most likely resulted from the downturn in the German manufacturing, whose scale surprised the Polish companies. According to business survey results, the manufacturing companies were increasing the inventories of both goods and finished products in Q2.
Conducive to the acceleration of the economic growth rate was also private consumption. Its annualized dynamics rose to 4.4% YoY in Q2 vs. 3.9% in Q1, supported by the statistical effects (the shift of the Easter holiday date), strong labour market, record optimism of households, and higher income due to social transfer payments. Nevertheless, the growth rate of consumption stood below our expectations, which may reflect households’ higher propensity to save.
We expect further deceleration of GDP growth
Today’s reading is in line with our forecast of GDP growth in the whole 2019 (4.4%). We believe that the economic growth will continue to reach relatively high levels in subsequent quarters but will stay within a slight downward trend. Conducive to the deceleration of economic growth in Q2 2019 will be lower contribution of net export, due to the downturn in global trade and in the Eurozone, and the abatement of the recovery in investments. On the other hand, the scale of the slowdown will be limited by fast consumption growth, supported by the payments of social transfers. We will present our revised medium-term macroeconomic scenario on 9 September.
Today's data on GDP are neutral for PLN and yields on Polish bonds.
