Nominal wages picked up by 8.6% YoY on the back of double-digit public sector wage growth and solid private wage increase. One more reason, why the central bank might hike sooner than expected, ING Bank Czech Republic says.
Wage dynamics pushed by the public sector wage growth
As in the previous quarter, robust wage growth was seen in the non-market segments, which is influenced by 10% increase in compensation of the civil servants and 15% increase for teachers in 2H17.
As such, wages in non-market sectors increased by 12.2% year on year in 1Q18. However, wages accelerated further also in market sectors to 7.8%. The annual dynamics itself ended slightly below the Czech National Bank's estimate of 8.1%, but the Czech Statistical Office revised the previous year's data downwards, so wage acceleration compared with 4Q17 was stronger than expected by the CNB.
Also, results of some wage negotiations for this year have not yet come through in 1Q18 figures which is why wages might rise even more next quarter.
Due to slightly lower inflation in the first quarter of this year at 1.9%, real wage growth accelerated even more, from 4.7% in 4Q17 and 3.7% for the whole 2017 (after revision) to 6.6% in 1Q18. This is the fastest year-on-year dynamics of real wages since the turn of 2002/2003, i.e. over the past 15 years.
Source: Jakub Seidler, Chief Economist, ING Bank Czech Republic
27th January 2023