GDP higher than it was before the pandemic outbreak

In accordance with the data published by Statistics Poland (GUS) today, in Q2 2021 GDP rose by 11.1% YoY comparing to a 0.9% drop in Q1 2021, running slightly above our forecast that was consistent with the flash estimate published earlier (10.9%). It was the highest GDP growth in Poland in the history of the survey, and it was largely connected with the last year’s low base effect caused by restrictions introduced in the wake of the first wave of the pandemic. Seasonally-adjusted quarterly GDP growth accelerated from 1.3% in Q1 2021 to 2.1% in Q2 2021. This means that the second quarter saw the first GDP higher than the pre-pandemic level (by 0.8%).

Consumption and inventories as main GDP growth drivers

A higher contribution of consumption (7.3 pp. in Q2 vs. 0.1 pp. in Q1), the annual growth of which accelerated from 0.2% YoY to 13.3% was the main GDP growth driver in Q2 comparing to the first quarter. Such a strong consumption growth resulted from the low base effect mentioned above as well as from the opening of the economy in Q2 and the release of the pent-up demand. The inventories ranked second as regards an increase in contribution to the GDP growth (a 2.6 pp. increase from 0.3 pp. in Q1), which was also connected with last year’s low base. In nominal terms, inventories in the second quarter increased by PLN 21.9bn, exceeding the total increase in inventories reported in Q2 2020-Q1 2021. This suggests that while the demand in the second quarter was much stronger, the enterprises were increasing their inventories in response to an improvement in the pandemic situation and related significant improvement of the economic outlook, but also in response to the increasing supply barriers (shortages of semi-finished products and components). This assessment is supported by business survey results (Quick NBP Monitoring). They pointed to the problem connected with the shortage of inventories indicated by the enterprises in the second quarter, the shortage reaching the highest level in the history of the survey. In our opinion, last year’s low base and the enterprises that were quickly increasing their inventories were the main drivers of quick growth in imports (35.8% YoY vs. 10.0% in Q1) that once again exceeded the growth in exports (29.3% vs. 5.7%). Consequently, the contribution of net exports towards the GDP growth in Q2 remained negative (-0.7 pp. vs. -1.9 pp. in Q1).

Recovery in investments weaker than expected

A higher contribution of investments (+0.8 pp. in Q2 2021 vs. +0.2 pp. in Q1 2021) was another factor driving the economic growth up, with investments going up from 1.3% YoY to 5.0%. Therefore, the growth in investments was much lower comparing to market expectations (10.7%) and our forecast (12.3%). The available data on investment activity of enterprises show that the real investment growth in the second quarter increased in such a way as to reach a two-digit level for both enterprises having at least 50 employees and small and medium-sized ones (i.e. those having 10 to 49 employees). In our opinion, the total growth in investments was much lower than expected because the investment activity in the public sector, including local government units, was lower than projected.

Inflation highest in 20 years

Today’s final GDP data show that consumption in H2 2021 will grow faster than we expected, while the growth in investments is highly likely to be slower than we assumed in our forecasts. Following the today’s publication of preliminary, higher-than-expected data on inflation in August (5.4% YoY vs. 5.0% in July, highest since June 2001, mainly as a result of accelerated food prices growth and higher core inflation), we can see that there is an upside risk for the inflation path that we projected for the quarters to come. We will present our new macroeconomic scenario in the next MACROmap.

In our opinion, today’s preliminary data on inflation in August and the data on GDP in Q2 are slightly positive for the PLN and the yields on Polish bonds.

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