Labour market remains tight, industrial output expands quickly
Highest wage growth in enterprises in 14 years
In accordance with the GUS data published today, nominal wage growth in the sector of businesses employing more than 9 employees increased to 11.7% YoY in February (the strongest growth since June 2008) vs. 9.5% in January, running above our forecast (9.9%), which was consistent with the market consensus. In real terms, after the adjustments made to take into consideration the changes in prices, wages in companies rose by 2.9% YoY in February (the strongest growth since August 2021) comparing to +0.3% in January. Inflation drop seen in February contributed to a significant acceleration in the annual real wage growth (see MACROpulse of 17/03/2022).
In accordance with the press release published by the GUS, wages in February were driven up by additional bonuses, quarterly, semi-annual and annual rewards, salary rises, including where it happened as part of the mobility package, which boosted the wages of drivers employed by transport companies, and remuneration for overtime work. The reasons behind the wage growth shown by the GUS confirm that the increasing wage pressure resulting from a favourable situation in the labour market and high inflation remains an important factor conducive to the acceleration of wage growth in the sector of enterprises. In our opinion, the wage growth data for February is indicative of a significant upside risk to our wage growth forecast for the entire economy for 2022 (9.1%).
A stronger growth in wages combined with a slight slowdown of the employment growth in the enterprise sector in February (a drop to 2.2% YoY from 2.3% in January) resulted in an increase in the real wage fund growth rate in the enterprise sector, the rate being the product of employment and average wage adjusted for changes in prices, from 2.6% YoY in January to 5.2% in February (the highest level since July 2021). Despite a strong acceleration in the real wage fund growth in February, we expect the fund growth to be much slower than the consumption growth (7.3% YoY vs. 7.9% in Q4 2021). Last year’s low base (the impact of pandemic-related restrictions), the effect of the pent-up demand (which was not released due to the restrictions in force at the time) and households' increased expenses due to the inflow of refugees from Ukraine will be driving consumption up in Q1 2022. We still believe that consumption will slow down significantly in Q2 2022 as a result of an increasing uncertainty in the wake of the outbreak of the war in Ukraine, inflation rise, and strong deterioration in consumers’ sentiments (see MACROmap of 07/03/2022).
Activity in the industry keeps on growing fast
In accordance with the GUS data, the volume of industrial production sold in enterprises employing more than 9 people increased by 17.6% YoY in February compared to 19.2% in January, running close to what we predicted in our forecast (17.4%) and markedly above the market expectations (16.2%). Seasonally-adjusted industrial production rose by 2.1% MoM in February (vs. 4.2% in January), which means that the activity in the industry keeps on accelerating quickly.
February saw an increase in the production growth in construction-related sectors (23.3% YoY vs. 22.9% in January), which is another signal of recovery in private investments following a surprisingly strong growth in the construction and assembly production seen in January (see MACROmap of 21/02/2022). Production growth slowed down slightly in those categories, where production is mostly export-oriented (10.1% YoY in February vs. 12.2%) and in other categories of the industry (21.4% vs. 22.9%). The continuing quick growth in the production for exports is consistent with the results of the PMI survey, which were indicative of a faster growth in the number of export orders and a gradual reduction of the barrier caused by bottlenecks in the production process (see MACROpulse of 01/03/2022).
Noteworthy about the production structure data for February is a quick growth in terms of production of intermediate goods (19.0% YoY), which is indicative of a continuation of the trend observed since mid-2021, consisting in companies increasing their inventories to ensure the continuity of production amidst limited supplies of semi-finished products and components. Despite those actions, we expect a slight slowdown of the industrial production growth in the months to come as a result of a transitional increase of supply barriers in relation to the war in Ukraine. Those barriers may have an impact on both construction-related sectors (limited availability of certain raw materials and a slowdown of activity in the construction sector due to the outflow of Ukrainian employees) and export-oriented sectors, which are dependent on components imported from Ukraine (e.g. automotive industry).
Slight GDP slowdown in Q1 2022
Today's labour market and industrial production data support our forecast, in which Poland's GDP will grow by 6.1% YoY in Q1 2022 vs. 7.3% in Q4 2021. In our opinion, the data are slightly positive for the PLN and the yields on Polish bonds.