Wages maintained a strong 1.7% quarter-on-quarter pace at the end of last year
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Average nominal wage growth continued at a brisk 7.2% annual rate in the final quarter of 2024. This was a slight acceleration from the 7.1% growth in the previous quarter. Average wage growth was driven by market sectors, which posted stronger annual growth of 8.3% in the fourth quarter, while non-market sectors slowed their growth to below 3%. The level of average wages approached 50k at the end of the year. After seasonal adjustment, it reached around CZK 47.5 thousand. CZK 47.
Nominal wage growth of 7.2% slightly exceeded analysts' expectations (6.9%) and the CNB's (7%). This reflects still strong quarter-on-quarter growth after seasonal adjustment, which remained at a strong 1.7% at the end of 2024, compared with an average of 1.8% in the previous three quarters. This may pose a risk to both the CNB's 2025 outlook (6.1%) of 0.7% points and the CBA's forecast (5.8%) of 1% points, if quarterly momentum remains unchanged.
Stronger wage dynamics on a quarter-on-quarter basis still shows inflationary potential. As the consensus still assumes a solid pace of economic growth, stronger productivity growth will be needed to dampen inflationary pressures.
Still strong wage momentum in the economy
Nominal wage growth in Q4 slightly exceeded the CNB's expectations by 0.2% points, but growth in unit labour costs (the relationship between wages and productivity) was in line. However, wage growth in the market sector, at 8.3% year-on-year, was stronger by 0.6% point than the CNB had expected. We also estimate that their quarter-on-quarter growth remained around 2% (even the weaker manufacturing sector still showed strong growth of 1.5%).
Unless there is a more significant cooling of the labour market, which is less likely given the outlook for around 2% economic growth this year, then market wage growth will remain an inflationary factor. Especially if there is a stronger recovery in non-market wages this year. We estimate quarter-on-quarter wage growth at around 0.7% in Q4-2024 (the CNB expects it to accelerate to 1.3% in 2025).
Annual figures: nominal +7.1%; real: 4.5%
Average wage growth last year was a more moderate 7.1%, following 8% growth in 2023, which was stronger due to low growth in 2022. Real wages thus grew by 4.5% y/y in 2024, following a decline of 2.4% in 2023.
