PL: Growth structure surprises, inventories the main source

The Polish statistical office has released the breakdown of the third quarter GDP, confirming an annual growth rate of 2.7%. However, the structure of this growth was unexpected, driven primarily by inventories, while consumption, trade, and investments struggled.

Throughout the previous quarters, our baseline assumption was that growth would be fueled by consumption, predominantly from the household sector. However, the third quarter breakdown revealed that household expenditure grew by only 0.3% year-on-year, which was well below our expectations, even after the disappointing retail figures in recent months. This weak performance may have been partly influenced by the floods in September. Overall, households contributed only 0.2 percentage points to the 2.7% growth figure, while public consumption added 0.8 percentage points, with a growth rate of 4.5% y/y.

Investments stagnated in annual terms, which we consider a relatively good result, mainly due to the high base effect from last year when investment activity in H2 was exceptionally strong due to the end of the EU funding period. In terms of trade, exports contracted by 0.7% y/y, while imports grew by 1.9%, resulting in a negative 1.5 percentage point contribution to GDP growth in the third quarter.

The most significant surprise came from inventories, which increased substantially, contributing 3.2 percentage points to growth. This structure is an anomaly and should not be expected to be repeated in the last quarter. Our estimate for annual growth in 2024 is 2.8%, with an acceleration to 3.3% in 2025.