Real wage growth lowest since August 2013

In accordance with GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 persons dropped to 2.7% YoY in December vs. 4.0% in November, running below our forecast (3.7%) and the market consensus (4.0%). In real terms, inflation-adjusted corporate wages rose by 1.8% YoY in December vs. 4.0% in November. Thus, real wage growth hit the lowest level since August 2013.

In our view, one of the main factors conducive to lower corporate wage growth in December 2016 was changed timing of annual bonuses paid in the section ”coal mining and quarrying”, including in particular the payment in instalments of the bonus marking St. Barbara's Day, being the sector's holiday, in Jastrzębska Spółka Węglowa. However, St. Barbara effect fails to fully explain the sharp decline in wage dynamics in December and an in-depth reply to the question about its reasons will be provided by the publication of data on wages in respective sections of the corporate sector scheduled for the end of January. We expect the corporate wage growth to sharply accelerate in January, due to the abatement of the above-mentioned "St. Barbara effect” and a stronger-than-last-year increase of minimal wage.

In the coming months, wage growth will also be boosted by further gradual increase in wage pressure, related to the signaled by enterprises continuing barrier to development in the form of difficulties in finding skilled labour. According to our estimates, seasonally adjusted labour market restrictiveness index (job offers declared by enterprises divided by number of registered unemployed) recorded a sharp increase in December, reaching a record high level. Despite the expected by us increase in wage pressure, real corporate wage growth will sharply decline from 3.2% YoY in Q4 2016 to ca. 2.5% YoY in Q1 2017, due to the forecasted by us increase in inflation from 0.2% YoY in Q4 2016 to 1.5% YoY in Q1 2017.

Strong recovery in the labour market continues

According to GUS data, corporate employment rose by 7.4k MoM in December (3.1% YoY, in line with the consensus) vs. a 12.4k increase in November. Employment increased sharply in December despite the seasonal factors conducive to lower employment in construction and the likely abatement of the effect related to the launch of production in the Volkswagen plant in Września (employment in the section "manufacture of motor vehicles, trailers and semi-trailers” rose by 3k between September and November 2016). This confirms that the labour market in Poland is at the stage of strong recovery and it is in line with our scenario, in which the labour market will reach equilibrium at the turn of 2017 and 2018 (see MACROmap of 12/12/2016).

Slight downside risk to consumption growth rate in Q4

Corporate employment rose by 3.1% YoY in Q4 vs. 3.2% in Q3. In effect, the real wage fund growth (employment times average wages) in enterprises dropped to 6.4% YoY in Q4 vs. 8.6% in Q3. This signals a slight downside risk to our forecast of private consumption dynamics in Q4 2016 (3.9% YoY, unchanged vs Q3).

Wage data negative for PLN and bond yields

In our view, today's weaker-than-expected data on average wage in December are slightly negative for PLN and bond yields.