Wage growth hits a record high again
In accordance with the GUS data published today, nominal wage growth in the sector of businesses employing more than 9 employees increased to 12.4% YoY in March (the strongest growth since April 2008) vs. 11.7% in February, running above our forecast (10.7%) and the market consensus (10.6%). In real terms, wages in enterprise sector rose by 1.3% YoY in March comparing to 2.9% in February. Inflation rise seen in March contributed to a slowdown in the annual real wage growth (see MACROpulse of 15/04/2022).
In accordance with the GUS press release, wages in March were driven up by discretionary bonuses, length-of service awards, Easter and quarterly bonuses, annual bonuses, increasing wages and salaries, including where it happened as part of the mobility package, remuneration for overtime work, and retirement severance payments. It is the second consecutive month that the “increasing wages and salaries” are explicitly referred to in a GUS press release as a reason behind the wage growth, which confirms that the growing wage pressure is an important factor boosting the wage growth in the enterprise sector. In our opinion, the wage growth data for March is indicative of a significant upside risk to our wage growth forecast for the entire economy for 2022 (9.1%).
No outflow of Ukrainian personnel reported so far
Employment growth in the enterprise sector increased to 2.4% YoY in March vs. 2.2% in February, running in line with the market consensus and above our forecast (2.1%). In monthly terms, the number of employed grew by 10.0k. The extent to which today’s data reflects the employment rate fall reported in mass media and expected by us due to the return of the Ukrainians working in Poland to their homeland is limited. We think that some of those people took unpaid leave in agreement with their employers instead of quitting their jobs. If the unpaid leave is shorter than three months, the people who have taken it are still treated as employed in accordance with the GUS survey methodology. Therefore, the outflow of employees to Ukraine will be reported with a delay. Furthermore, some of the Ukrainians are likely to have been employed under civil law contracts, which means that they were not included in the employment statistics for the sector of enterprises.
A stronger growth in employment combined with a slowdown of wage growth in the enterprise sector resulted in a decrease 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, to 3.8% YoY in March vs. 5.2% in February. Average real wage fund growth increased to 3.8% YoY in Q1 2022 vs. 2.5% in Q4 2021. At the same time, we can see an upside risk to our forecast in which the consumption growth was to stand at 7.3% YoY in Q1 2022 vs. 7.9% in Q4 2021. Consumption growth in Q1 will be supported by last year’s low base (the impact of pandemic-related restrictions), the effect of the pent-up demand (which was not fulfilled earlier due to the restrictions that were in force earlier) and increased household expenses connected with the inflow of Ukrainian refugees. It will be possible to assess this risk more thoroughly when the data on retail sales in March is published tomorrow.
Polish industry unconcerned by war in Ukraine so far
In accordance with the GUS data, the volume of sold production of industry in enterprises employing more than 9 people increased by 17.3% YoY in March vs. 17.6% in February, running markedly above the market consensus (11.8%) and our forecast (13.0%). Seasonally-adjusted industrial production rose by 2.1% MoM in March, which means that the activity in the industry keeps on accelerating quickly despite the ongoing war in Ukraine.
March saw a significant production slowdown in those categories, where sales are mostly export-oriented (2.2% YoY in March vs. 10.1%). It resulted primarily from a strong production decline in the “vehicles, trailers and semi-trailers” category (by 12.7% YoY) resulting from a two-week downtime in the Volkswagen factory caused by the shortage of components. Production growth in export-oriented categories excluding the automotive industry would have been much higher (8.6% YoY). This means that the ongoing war in Ukraine has not contributed to any significant export slowdown so far, contrary to the drop in the orders for exports reported in the PMI survey (see MACROpulse of 01/04/2022). In March, we were able to see production growth stabilisation in the construction-related sectors (23.4% YoY vs. 23.3% in February) and acceleration in other industry categories except the export-oriented ones (26.1% vs. 21.4%).
Upside risk for GDP growth in Q1 2022
Today's labour market and industrial production data pose an upside risk our forecast, in which Poland's GDP is to 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.