ING BSK: Wages growth will remain double-digit in the enterprise sector this year

Wage growth will remain double-digit nominally in the sector of enterprises this year, due to the pressure generated by increases in the public sector and for teachers, assess the economists of ING Bank Śląski. According to them, such a coupling will maintain service price inflation at the level of 6-7% y/y in the following quarters, which is, according to economists, one of the reasons for the persistability of inflation in Poland.

The average wage in the enterprise sector increased by 12.9%/y in February, above expectations (11.3%r/y), after an increase of 12.8% in January. The labour market remains tight, and the limited labour supply combined with another jump in the minimum wage increases since the beginning of 2024 have been putting pressure on the average wages. Falling demand for work as has been seen so far mainly in some production industries (e.g. furniture), but this slightly affects the overall wage dynamics. Real wage growth is the highest since the end of the 1990s, according to the bank's commentary on the data of the Central Statistical Office on wages and employment.

The high rate of wages is the main reason for maintaining high service inflation, highlighted.

Even a possible fall in commodity inflation to zero will not result in a return of core inflation to the NBP target (2.5%r/y), because service price inflation may remain at the level of up to 6-7% YoY in subsequent quarters. This is one of the reasons for the persistability of inflation in Poland. Much more important than the 'spoken' topic of energy price release. The real problem with inflation is labor costs and core inflation, not regulatory decisions related to the unfreezing of electricity and gas prices. We are not expecting foot cuts in 2024.

According to ING BSK economists, the labour market is strong, there is a demand for labor, and the declines in employment are small. There is work hamstering due to the low supply, which will generate "strong consumer demand in subsequent quarters (especially taking into account, among others, the high valorization of pension and social benefits)".

Therefore, we expect that despite the increased propensity to save, consumption will be the main driver of the growth of the domestic economy this year, it reported.

The Central Statistical Office (GUS) reported today that the average wage in the enterprise sector (in which the number of employees exceeds 9 people) in February this year increased by 12.9% y/y, and employment in enterprises decreased by 0.2% y/y. On a monthly basis, the average salary increased by 2.7% and amounted to PLN 7,978.99. On the other hand, employment in companies on a monthly basis decreased by 0.1% and amounted to 6 510,9 thousand full-time jobs.

The market consensus predicted an increase of 11.3% growth in wages and a 0.2% decrease in y/y in the case of employment.

Source: ING BSK, GUS and ISBnews