Inflation rise inhibits wage fund and consumption growth
Real wage growth lowest since August 2020
In accordance with the GUS data published today, nominal wage growth in the sector of companies employing more than 9 employees fell from 8.7% YoY in September to 8.4% YoY in October, running slightly below the market consensus (8.5%) and our forecast (9.0%). In real terms, after adjusting for price changes, wages in businesses rose by 1.5% YoY in October vs. a 2.7% growth in September. This means that in October the real annual wage growth in the enterprise sector reached the lowest level since August 2020. Today’s data on wages shows that the wage growth remains moderate despite the increasing signals from businesses showing that the barrier resulting from the lack of qualified workforce is growing along with the wage pressure. This supports our scenario, in which annual wage growth will not exceed 10% across the entire economy in the quarters to come (see MACROmap of 15/11/2021). However, we expect the wage growth in the enterprise sector to accelerate in November and December 2021 due to a quick increase in the number of quarantined workers that will be followed by a growth in the amount of wages paid for overtime work in the manufacturing sector.
Employment stops falling
Based on GUS data, employment growth in the enterprise sector slowed down to 0.5% YoY in October vs. 0.6% in September, running above the market consensus that was consistent with our forecast (0.4%). Month on month, employment increased by 3.9k in October, compared to a drop of 4.8k in September. Employment in October grew to a level that was lower by 94.8k comparing to February 2020, when the pandemic began. According to the GUS, it resulted, among others, from employers hiring new employees, upward adjustments to working time bases to pre-pandemic levels, and reduced absence connected with unpaid leave. In our opinion, employment growth in October following the decline in the two preceding months indicates that the negative impact of factors inhibiting the employment growth, such as the adjustment of employment in the companies using the financial shield, the uncertainty related to the fourth wave of the pandemic or the continuous presence of bottlenecks in production chains, is receding. We continue to believe that we will see the employment growing in November and December.
Inflation rise inhibits wage fund and consumption growth
The real wage fund growth rate in the enterprise sector being the product of employment and average wages adjusted to take into consideration the changes in prices went down from 3.3% YoY in September and 4.4% YoY in Q3 to 2.0% YoY in October. Thus the rate slipped to the lowest level since February 2021. This significant decline was caused by the slowdown in employment and wage growth discussed above and further inflation rise in October (see MACROpulse of 15/11/2021). The October slowdown in the real wage fund growth supports our forecast in which consumption growth will also slow down significantly, from 5.0% YoY in Q3 2021 to 3.0% YoY in Q4 2021. Further deterioration in consumer sentiment observed in November, which in our opinion has been caused by the strong inflation rise in the first place, supports that scenario. The value of the component describing changes expected by households to take place in their financial situation in the next 12 months fell sharply to reach the lowest level since May 2020, which was the time when the outbreak of the pandemic and the related restrictions exerted a strong negative impact on the labour market and the consumer sentiment. This suggests that households will be cutting their expenses in Q4 2021 in response to the strong inflation rise.
In our opinion, today’s data on wages and employment in the enterprise sector and on consumer sentiment have a slight negative impact on the PLN and the yields on bonds.