Three months passed like water and statisticians served us wage statistics again. In Q4 2023, the average gross monthly nominal wage rose by 6.3 % to CZK 46,013 compared to the same period of the previous year. However, consumer prices increased by 7.6 % over the period. This means that wage growth could not outpace the rate of inflation even at the end of 2023. As a result, average wages did not grow in the last quarter of 2023, but fell by 1.2 % in real terms. This marked the ninth consecutive quarter of real poverty for Czech households. Where did wages grow fastest - i.e. at a double-digit rate? The mining and quarrying sector reported wage growth of 10.3 %, while the accommodation, food and beverage sector saw wage growth of 10.1 1 %. The lowest growth of 0.3 % occurred in other activities.
What about median wages - the middle wage in the economy? We find this by ranking all wages from highest to lowest and sticking a finger in the exact middle. The median wage reached CZK 39 685 in the fourth quarter of 2023. The median increased by 6.0 % compared to the same period of the previous year. Thus, the median grew slightly slower than the average wage. This suggests that the lowest wages in the economy (e.g. for manufacturing workers) grew slightly slower than the high wages in the economy. This is evidence that industrial firms are no longer competing for every new employee because of the decline in new orders. For the record, Škoda Auto announced at the end of last year that it planned to cut costs by, for example, hiring fewer employees, adjusting their contracts or, on the contrary, increasing the number of agency workers.
Looking back, over the whole of 2023, wages fell by 2.9 % in real terms. The background to this is that inflation has reached 10.7 % and nominal wage growth has been 7.5 %. The big difference this year will be that the rate of consumer inflation has come down to single digit levels. We are most recently projecting an average inflation rate for 2024 of 2.3 %. This is already the level of inflation that wage growth can cope with. So, after more than 2 years, we will see wage growth written into paychecks so that employees will be better off in real terms. So this year wages will rise in real terms. But the question is at what rate will it...
Wages will certainly not grow at the same rate across the economy. Wage growth should continue to be relatively brisk in market sectors - i.e. in selected services. On the other hand, the state will cut back on public sector wages as a result of efforts to consolidate public spending. Already at the end of 2023, we have seen relatively slow wage growth in the public administration and non-market sectors. Moreover, industry is complaining about a lack of new contracts. Even this does not create room for significant wage growth - on the contrary, we will see staff reductions in a number of manufacturing companies. Skoda Auto, for example, plans to increase its employees' nominal wages by only a relatively cautious 5 % this year. As a result, in 2024 we will see real wage growth of 3-4 % on average in the Czech economy.
The koruna weakened slightly towards CZK 25.40 to the euro during the morning.However, it eventually returned to CZK 25.35 to the euro. The morning depreciation of the koruna was a reaction to the fact that the market was expecting a milder decline in real wages. In other words - pressure is growing again for the Czech National Bank to cut interest rates substantially. We are betting that the Czech National Bank will cut interest rates at a pace of 50 to 75 basis points at its next meetings. If interest rates are cut more quickly, we would be looking for a significant depreciation of the koruna, towards the level of CZK 25.50/EUR.
The dollar was again only stagnant at the level of 1.085 USD/EUR. The important events of this week will be on the agenda at the end of the week. At that time, we will have the European Central Bank meeting and the US labour market numbers will be released.
Markéta Šichtařová
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