Polish wage growth slows sharply in December, may remain subdued in 2017

The Polish labor market data that was released yesterday underlined the risks to prematurely concluding that inflation pressure is accelerating, noted Commerzbank. Poland’s employment continued to grow at a stable rate in December, as it has in the past year; however, wage growth slowed sharply to 2.7 percent year-on-year, as compared with market expectations of a 4 percent rise.

The slowdown in wage growth was sharp enough to bring up question marks about the underlying trend. Thus there are two possibilities to consider: firstly, this was bonus related noise, probably due to the mining sector, or secondly, it might be that the wage growth is actually slowing down.

The consensus GDP growth projects have been falling further in the past month, which was underlined by the latest survey of forecasters conducted by the National Bank of Poland. Still, the survey indicated 2017 growth projections in the 3 percent region as compared to the anticipation of 2.7 percent, said Commerzbank.

In that case, wage growth might decelerate further and remain weak in 2017 as the labor market starts to ease. Several hawkish MPC members base their stance on the tightening labor market alone.

“Polish monetary policy will not need to be tighter in 2017 than it was in 2016. We see EUR/PLN rising gradually towards 4.50 by the summer”, added Commerzbank.