Surprising deceleration of wage growth in September

In accordance with GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 persons dropped to 6.7% YoY in September from 6.8% in August, running significantly below our forecast equal to the market consensus (7.1%). Real, adjusted for the changes in prices, corporate wages rose by 4.7% YoY in September (same as in August).

Negative for wage growth was an unafavourable difference in the number of working days (in August 2018 the number of working days was the same as in 2017 while in September 2018 it was 1 day lower than last year), which reduced the wage dynamics for piece work. However, the decrease in the nominal wage dynamics was stronger than it would result from only calendar effects. It is particularly surprising in the context of last year's low base effect, as the wage dynamics recorded in September 2017 in MoM terms have been the lowest since 2012 (compared to similar months in the past years). Most likely, the main factor behind lower wage dynamics in the corporate sector were shifts of the payment of variable remuneration in some branches. The publication of detailed data on the wage structure in the Statistical Bulletin will enable us to verify this hypothesis.

We expect that the annual wage growth supported by moderate wage pressure in several industries will stand at around 7% in subsequent months. The factors which limit wage growth in enterprises are the uncertainty about the date of the launch of the Employee Equity Scheme (conducive to increase in nominal wage fund) and the possible entry into force of the act lifting the limit on the annual basis of assessment of pension contributions (the projected average wages in 2019 times 30). We believe that the negative impact of this factor on corporate wage growth will keep growing in the coming months. The room for maneuver in the context of wage increases will also be limited by higher operating costs of enterprises due to higher electricity prices (see MACROmap of 8/10/2018).

Second month of employment decline

According to GUS data, corporate sector employment dropped by 4.2k MoM in September vs. a 2.0k decrease in August. The annual employment growth dropped to 3.2% YoY in September vs. 3.4% in August. A second consecutive month of employment decline is a surprise in the context of the good situation in the labour market. It probably is a result of a simultaneous restructuring processes in some industries (conducive to lower number of jobs) and the growing barrier in the form of shortage of skilled labour, which is more and more heavily slowing down the corporate employment growth. The slowdown in corporate employment growth observed from July 2018 is in line with our scenario assuming a gradual decline in non-agricultural employment growth rate in the coming quarters.

Slower consumption growth in Q3

We estimate that the real wage fund growth rate (employment times average wages) in enterprises dropped to 8.1% YoY in September vs. 8.2% in August and 9.5% in Q2. In the whole Q3 the real wage fund has increased in annual terms by 8.3% YoY vs. 9.5% (the slowest growth rate since Q2 2017). This poses a slight downside risk to our forecast of private consumption growth in Q3 2018 (4.8% YoY vs. 4.9% in Q2).

Today's data on corporate wages and employment are slightly negative for PLN and bond yields, we believe.

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