Production and labour data support ‘soft landing’ scenario

Payments of bonuses in mining boosted wage growth rate

In accordance with the GUS data published today, the nominal wage growth rate in the sector of enterprises employing more than 9 people increased to 13.9% YoY in November from 13.0% in October, running above the market consensus (13.3%) and our forecast (12.4%). In real terms, wages in businesses, adjusted for price changes, fell by 3.1% YoY in November compared to a drop of 4.1% in October.

Wage growth structure data for November shows that it was primarily a faster wage growth in ‘mining and extraction’ (35.8% YoY in November vs. 10.8% in October) that drove the total wage growth up. This is consistent with the GUS’ press release, which among the factors spurring salaries to grow in November, such as payments of quarterly and holiday bonuses, annual bonuses, inflation-related bonuses, overtime payments and salary increases, also listed bonuses paid out on the occasion of the Miner’s Day. Thus, the factors that drove up the average wage growth in November are, to a large extent, one-off events and once they are no longer applicable, wage growth should slow down. This is consistent with our assessment, according to which, despite the persistently high wage pressures, against the backdrop of rising operating costs of enterprises and the economic slowdown expected by us, the annual wage growth will follow a slight downward trend.

Wage fund data signal decline in consumption in Q4

Employment growth in the business sector dropped to 2.3% YoY in November from 2.4% in October, consistent with the market consensus and our forecast. Month-on-month, employment grew by 6.6k. Following a historically sharp rise in employment in October, a robust increase in employment was also recorded in November (see MACROpulse of 22/11/2022).

A slowdown in employment growth and a slower decline in real wages in the enterprise sector contributed to an increase in the real fund growth in this sector (the product of employment and average wage adjusted for changes in prices) to -0.9% YoY in November vs. -1.9% in October and 0.6% in Q3 Data on the wage fund is consistent with our forecast of a further, substantial decline in consumption growth (to -2.0% YoY in Q4 vs. 0.9% in Q3).

Very robust data on production consistent with Polish economy’s ‘soft landing’ scenario

In accordance with the GUS data, the growth of industrial production sold in enterprises employing more than 9 people slipped to 4.6% YoY in November compared to 6.8% in October, running markedly below the market consensus (2.0%) and our forecast (1.6%). Adjusted for seasonal factors, industrial production expanded by 2.7% MoM in November.

Particularly noteworthy in the data structure is the growth of production in construction-related sectors (9.5% YoY in November vs. 6.2% in October). Equally interesting is that the fast pace of growth of industrial production was maintained in export-driven sectors (11.2 YoY in November vs. 18.1% in October). In our opinion, production in export-driven industries is supported by a reduction in production backlogs coupled with an easing of supply constraints (with shortages of raw materials and components becoming less severe). In non-export-driven and non-construction sectors, industrial production growth slowed down to -0.2% YoY in November from 0.8% in October.

The data on the labour market and industrial production for November released today present a slight upside risk to our GDP growth forecast for Q4 projecting a further slowdown of GDP growth (1.1% YoY vs. 3.6% in Q3). This means that our ‘soft landing’ scenario is materialising. In this scenario, GDP growth in Poland in 2023 will remain positive despite a significant slowdown (1.2% YoY vs. 4.5% in 2022 and 6.8% in 2021).

We believe that today’s data is slightly positive for the PLN and yields on Polish bonds.