Wage growth below expectations

According to GUS data published today, nominal wage dynamics in the sector of enterprises employing above 9 people decreased to 6.6% YoY in September vs. 6.8% in August, running below the market consensus (7.1%) and our forecast (7.4%). In real terms, corporate wages, adjusted for the changes in prices, rose by 3.9% YoY in September vs. a 3.8% increase in August.

The annual wage dynamics in September decreased compared to August despite the statistical effect in the form of a favourable difference in the number of working days (in August 2019 the number of working days was 1 day lower from 2018 while in September 2019 it was higher by 1 day than the year before) which was conducive to an increase in the wage dynamics of workers paid by the piece. In our view, one of the reasons for lower nominal wage dynamics in September was the shift of the payment of bonuses in some branches. The verification of this hypothesis will be possible no sooner than after the publication of detailed data on wages structure in the Statistical Bulletin.

In our view, other factors with a growing negative impact on nominal wage dynamics are the decreasing capacity utilization and the increasingly conservative wage policy of companies preparing for the institutional changes in the Polish labour market. These changes, conducive to higher cost of labour, include the launch of the Employee Equity Schemes, the planned abolition of the limitation of the annual base for the assessment of pension and disability benefit contributions (in the light of today’s statement by J. Gowin who said that the Alliance would vote against this solution, the likelihood of its implementation has significantly decreased), and the announced sharp increase in the minimum wage in subsequent years. This view is supported by the published this week results of the NBP Quick Monitoring in which the percentage of companies indicating costs of labour as a barrier to growth has sharply increased in Q3 compared to Q2. Consequently, we maintain our view that the probability of a significant acceleration in wage increase in the coming months is low.

Growing costs of labour will enforce automation

According to GUS data, the employment growth rate in the enterprise sector has not changed in September compared to August and amounted to 2.6%, running in line with the market consensus and below our forecast (2.7%). In MoM terms, employment decreased by 3.6k in September vs. a 7.6k decrease in August. The continuing decrease in employment in recent months shows that the importance of restructuring as a factor impacting on the demand for labour is growing. Due to continuing low inflation in Poland’s main trade partners, conducive to higher pressure on enterprises’ margins, the companies have limited possibilities of transferring the growing costs of labour to consumers. Consequently, it can be expected that to remain competitive some companies will strengthen the restructuring processes and will increase outlays on automation. According to the results of OECD surveys quoted in the NBP Quick Monitoring, ca. 20% of jobs in Poland could be automated.

Consumption growth to accelerate in Q3

We estimate that the real wage fund growth rate (the employment times the average salary) in enterprises has not changed in September compared to August and amounted to 6.5% YoY. In the whole Q3 it dropped to 6.7% vs. 7.1% in Q2. Nevertheless we maintain our forecast assuming a slight increase in private consumption dynamics to 4.6% YoY in Q3 vs. 4.4% in Q2, due to the payment of social benefits and strong labour market.

In our view, today’s data on salaries and employment in the enterprise sector are neutral for PLN and yields on bonds.

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