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Real wage fund growth rate at the highest level since 2008

Sharp acceleration of wage growth in October

In accordance with GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 persons rose to 7.4% YoY in October vs. 6.0% in September, running above our forecast (6.1%) and the market consensus (6.5%). In our view, the main factor behind higher wage growth in the sector of enterprises was the changed timing of bonuses paid in some branches and, to a smaller extent, the growing wage pressure resulting from improvement in the labour market. Positive for the wage growth rate was also a favourable difference in the number of working days (in October 2017 the number of working days was 1 day higher than in 2016 while in September 2017 it was 1 day lower than the year before), which boosted the growth rate of wages for piece work. We therefore believe that nominal wage dynamics will decrease in subsequent months. Real, adjusted for the changes in prices, corporate wages rose by 5.2% YoY vs. 3.8% in September.

Lowering of retirement age limited employment growth

According to GUS data, corporate employment rose by 5.0k MoM in October vs. a 5.2k increase in September. Consequently, the annual employment dynamics dropped to 4.4% in October vs. 4.5% in September. Like in the last few months the increase in employment in October was limited by the growing difficulties of companies in finding skilled labour. In addition, conducive to lower employment growth rate was the fact that some people took advantage of the entitlement to pension due to the reduction of retirement age. According to information obtained by PAP, between 1 and 28 October, ZUS issued more than 224k decisions granting these benefits, of which professionally active persons accounted for 31.9%. In subsequent quarters we expect deceleration of the improvement in the labour market and a slight decline in the annual employment dynamics.

Real wage fund growth rate at the highest level since 2008

We estimate that real wage fund growth rate (employment times average wages) in enterprises amounted to 9.9% YoY in October vs. 8.4% in September and 8.6% in Q3, hitting the highest level since September 2008. This poses a slight upside risk to our forecast in which private consumption growth will not change in Q4 compared to Q3 and will amount to 4.7% YoY.

Today's data on corporate wages and employment are slightly positive for PLN and yields on Polish bonds, we believe.