Final reading in line with the flash estimate
In accordance with the final estimate published by the GUS, GDP growth in Poland slowed from 3.2% YoY in Q2 to 2.7% YoY in Q3, running in line with the flash estimate and our forecast, but below former market consensus (2.9%). Seasonally-adjusted quarterly GDP growth slowed from 1.2% QoQ in Q2 to -0.1% in Q3 (upward revision from -0.2%). Consequently, the final reading has confirmed that quarter-on-quarter GDP shrank in Q3 2024 for the first time since Q2 2023.
Broad-based slowdown of economic growth
GDP growth slowdown between Q2 and Q3 was due to lower contributions from consumption (0.2 pp. in Q3 vs. 2.6 pp. in Q2), government spending (0.8 pp. vs. 2.2 pp.), investment (0.0 pp. vs. 0.5 pp.) and net exports (-1.5 pp. vs. -1.3 pp.), with the opposite impact coming from a higher contribution of inventories (3.2 pp. vs. -0.8 pp.). Consequently, GDP growth in Q3 was driven up primarily by inventories, as opposed to two previous quarters, when it was consumption that was the main driver of growth.
Substantial decline of consumption momentum
Particularly noteworthy about the data is a substantial decline in consumption momentum (0.3% YoY in Q3 vs. 4.6% in Q2). In our view, consumption growth was curbed by a substantial slowdown of real wage growth in the national economy, from 11.9% YoY in Q2 to 8.6% in Q3, which in turn drove the real wage fund growth significantly down, and resulted in a slower growth in demand for goods and services. Consumption growth in Q3 was slowed down even further by a surprisingly strong decline in the sales of goods last September, which indicated that households’ consumption sentiments were markedly depressed, even more so given the negative impact of the flood in Poland on households’ expenses (see MACROpulse of 22/10/2024).
Recession trends in global manufacturing hamper economic growth in Poland
Data for Q3 revealed a fall in growth for both exports (-0.7% YoY in Q3 vs. 2.9% in Q2) and imports (1.9% vs. 5.7%). In our opinion, the decline in exports was largely driven by the continuing recession trends in global manufacturing, which curb the demand for intermediate goods manufactured in Poland as part of global supply chains. The fall on the imports side, in turn, reflects a weaker domestic demand showing through a strong decline in consumption and investment growth.
Strongly rising inventories “save the day” for economic growth
As regards the data breakdown, it is worth noting a markedly higher contribution of inventories growth, partly driven by last year’s low base effects. However, the scale of growth in inventories combined with the stronger-than-expected consumption and investment growth decline suggests that some companies have overshot the demand, generating unplanned inventories of final goods. Our conclusion is underpinned by the PMI component for stock of finished goods, which printed above the 50-point mark in August and September for the first time since March 2024. At the same time, the strong rise in inventories is surprising given the results of NBP’s Quick Monitoring, which indicated that survey respondents’ inventories were shrinking rather than growing, and that the percentage of companies reporting having excessive inventories of finished goods also fell.
Moderate economic growth expected in Q4
With better-than-expected industrial production and retail sales data for October, we can see a slight upside risk to our forecast of continuing slowdown of GDP growth in Q4 (2.5% YoY vs. 2.7% in Q3). For 2025, we expect the GDP growth in Poland to accelerate slightly, driven by the expected economic recovery in the Eurozone and an increasing absorption of EU funds under the National Recovery Plan and the Cohesion Fund.
In our opinion, today’s GDP data, which is consistent with the flash estimate, is neutral for the PLN and yields on Polish bonds.
