Monday, June 02, 2008

Czech Wages and Salaries Q1 2008

Czech real-wage growth accelerated in the first quarter, raising concern that the central bank will lift the European Union's lowest interest rates once again.

The average gross monthly wage added 10.4 percent to 22,531 koruna ($1,398), the biggest jump since Q4 1998. The average monthly paycheck rose 2.8 percent, adjusted for inflation, compared with a revised 1.7 percent in the previous quarter, the Prague-based statistics office said today.

Real wages will probably continue to grow more slowly this year as rising consumer prices eat up most of nominal pay increases. The central bank expects inflation to return to its 3 percent target early next year, but this obviously remains to be seen. Policy makers monitor wage growth as a secondary indicator of price growth.

The average inflation-adjusted monthly wage rose 4.5 percent at private companies as the jobless rate fell to 5.2 percent in April, the lowest since the data series started in 2004. Gross private wages rose 12.2 percent in a year.

Salaries of state employees grew 3.5 percent in the quarter from a year earlier to 20,204 koruna, a 3.6 percent decline in real terms. The government, which last year capped public wage gains to curb a jump in spending, will probably face increased pressure to raise public wages, economists said.

The smallest relative growth of nominal wage (by CZ-NACE section) was recorded in education, public administration and defence, compulsory social security (both by 3.0%) and in health and social work, veterinary activities (by 5.3%). The biggest growth was recorded in electricity, gas and water supply (by 18.2%), fishing, fish farming and related service activities (by 17.2%) and real estate, renting and business activities (by 17.1%).

Monetary policy makers will evaluate the effects of accelerating inflation and currency gains on economic growth before deciding whether to further raise interest rates from 3.75 percent, currently the lowest in the European Union.

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