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Record strong wage growth in February

Industrial production above market expectations

In accordance with the GUS data, the volume of industrial production sold in enterprises employing more than 9 people increased by 3.3% YoY in February compared to a 2.9% YoY increase in January (revision from 1.6%), running above the market consensus (2.6%) and below our forecast (4.0%). Industrial production growth between January and February was largely driven up by the statistical effect of a favourable difference in the number of working days (in February 2024, there was one day more than in the previous year, while in January 2024 there was one day less than last year). Seasonally-adjusted industrial production shrank by 0.1% MoM in February, which represented the second consecutive monthly fall.

Uneven recovery in export industries

Due to the impact of favourable calendar effects, the increase in output growth rate was broad-based and was recorded in the three main industry segments, i.e. export-oriented sectors(1.3% in February vs. 0.8% in January), construction-related industries (0.9% vs. -2.0%) and other categories (4.7% vs. 2.6%). Noteworthy is the continued YoY increase in production in export industries, but it should be noted that it is quite uneven sector-wise. The automotive sector remains the main engine of growth, with categories such as 'motor vehicles, trailers and semi-trailers' and 'other transport equipment' recording clearly positive growth rates (13.9% and 17.8% YoY respectively in February). In other categories, though, we see a continued YoY decline in production, e.g. in 'electrical equipment' (-23.9% YoY in February), 'computers, electronic and optical products' (-1.0%) and textiles (-8.8%). In our view, the short-term outlook for output in export industries remains unfavourable due to reduced manufacturing activity in the Eurozone, including Germany, leading to lower demand for intermediate goods produced in Poland. More information on the outlook for the situation in export industries will be provided on Thursday, with the publication of the preliminary Eurozone PMI indices for March.

Surprising pattern of job losses

According to the GUS data released today, employment growth in the enterprise sector was unchanged in February compared to January at -0.2%, in line with the consensus and our forecast. The number of employed individuals shrank by 4.8k between January and February. While the sheer scale of the decline in employment was in line with expectations, its breakdown surprised. Indeed, the reduction in total employment was mainly attributable to the 'administration and support activities' category, where the number of people employed fell by 5.3k between January and February. In contrast, employment in manufacturing increased by 100 in February. This was the first MoM increase in employment in this category since September 2023, which may signal a gradual fading of the restructuring processes observed in the industry in recent months.

Wage growth still in double digits, wage pressures continue unabated

Nominal wage growth in the sector of enterprises with more than 9 employees increased from 12.8% YoY in January to 12.9% YoY in February, running markedly above market consensus (11.5%) and our forecast (11.2%). The significant increase in nominal wages was broad-based and was recorded in most of the categories reported by the GUS. Furthermore, wages increased by 2.7% on a monthly basis and this was the highest wage increase recorded in February in the history of the series at our disposal (since 2005). During this period, wages in February grew by an average of 1.0% MoM. Thus, today's data point to continued strong wage pressures in the Polish economy.

In real terms, after adjusting for price changes, wages in businesses rose by 9.9% YoY in February compared to an increase of 8.6% in January, their highest growth rate since at least 1999. The stabilisation of employment growth combined with a stronger real wage growth in the enterprise sector contributed to an increase in the real growth rate of the enterprise wage fund (the product of employment and average wage adjusted for changes in prices) from 8.6% YoY in January to 9.6% YoY in February, its highest level since January 2019. The wage fund data is consistent with our scenario of a recovery in consumption in the coming quarters (see MACROmap of 11/3/2024). It will be possible to assess private consumption trends more precisely when we see the retail sales data for February, which is to be published tomorrow.

GDP growth will accelerate in Q1

We maintain our forecast that GDP growth in Poland in Q1 will increase to 1.5% YoY vs. 1.0% in Q4. At the same time, we believe that the overall tone of the data from the Polish economy published today is slightly positive for the PLN exchange rate and Polish bond yields.