Wage Growth & Retail Sales Disappoint, Industrial Output Shrinks Less Than Forecast

Poland released a package of December economic activity data this morning, with most figures missing expectations, save for industrial output and employment which contracted less than forecast compared to last year.

• ING point to "mixed production data", with energy output proving exceptionally strong, while manufacturing remained weak due to softer EZ demand and the domestic consumer's unwillingness to spend. They attribute weaker-than-expected wage data to earlier bonus payments (i.e. before the October elections) and to private companies "saving ammunition" ahead of the significant minimum wage hike in January. They expect wages to return to double-digit growth this year. ING point to continued weakness in retail sales, noting that consumer spending is not recovering despite solid growth in real income, with surveys suggesting that better consumer sentiment coincides with more ambitious long-term saving plans amid elevated prices.
• mBank draw attention to weak wage data and above-forecast employment data. The see potential for employment growth as investments will rebound amid overall economic recovery. Meanwhile, they do not see the latest wage growth print as a turning point. In their view it was (1) too sudden, (2) the usual culprits (mining) weighed on the reading, (3) the transport sector underpeformed (perhaps due to less working days). In addition, they point to the upcoming minimum wage hikes and public sector salary hikes. mBank are optimistic about the prospects for domestic consumption, despite a weak retail sales outturn for December.
  
• Pekao point to a "massive" downside surprise in wage data, which likely stems from an overestimation of the impact of year-end bonuses and a smaller number of working days (-2 Y/Y). They expect wage growth to cool gradually through 2024. Pekao point to a rebound in employment, which fell just 0.1% Y/Y and edged higher on the sequential basis, which they believe will continue.
  
• The Polish Economic Institute believe that solid wage growth will be sustained through the whole year, with the January MIK survey pointing to large wage hikes at the beginning of 2024. They expect a recovery in employment going forward amid rising demand for workers. They note that manufacturing should recover this year, mostly driven by domestic demand, with weak EZ activity limiting expansion (the situation on that front may improve in 2H2024).

Fig. 1: Summary of December Activity Data