Wages are growing faster than the central bank expected, what does this mean?

Wages are growing faster than the central bank expected, what does this mean?
Wages are growing faster than the central bank expected, what does this mean?

Wages rose by 4.4% in the second quarter, which was less than we expected (6%) but more than the central bank forecast (2.7%).

The total figure is heavily influenced by the significant drop in wages paid in the health sector, where there was a sharp drop (-20.7%) due to exceptionally paid bonuses in the past year. In addition, salaries also grew very slowly in all non-market sectors – in state administration (3.8%) and in the field of education (+2.6%). This will probably change in the second half of the year – state from 1.9. added 10% to roughly half of civil servants.

On the contrary, in the key market sectors relatively rapid wage growth continued in the second quarter. In industry and construction, as well as in transport, wage growth is between 7.5 – 9%. On average, more are being added in services than in industry – the drivers were IT (+11%), hospitality and hotel industry (+11.3%) and administrative and support activities (+10.3%). Moreover, brisk wage growth in market sectors went hand in hand with further employment growth in the vast majority of market sectors.

From the point of view of the central bank, it was the market sector that surprised with significantly faster wage growth – there the central bank expected growth of 2.9%, while in reality, according to rough calculations, the dynamics of market wages was significantly higher (8.5%). However, it is questionable whether this will be a sufficient reason for the “new” dove wing in the banking board to consider further interest rate increases. Given the strong dovish rhetoric of recent weeks and the drop in household consumption in the second quarter (albeit milder than the CNB expected), we consider it more likely that the Bank Board will leave interest rates unchanged in September. At the November session (with a new forecast), the rise in rates may theoretically come into play, especially if the koruna should be under more persistent pressure when rates rise abroad (ECB, FED).

The article is in Czech

Tags: Wages growing faster central bank expected

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