Survey results: Growth pace of wages is weakening

We have published the results of our survey of the 2nd quarter of 2020 show the consequences of the pandemic on the Czech economy. These consequences were not visible during the first quarter of 2020.

The pandemic hit the Czech economy in a situation of gradually weakening of pace of economic growth. Several risks were present as well (e.g. slower growth pace by our main economic partner, trade wars, threats of the protectionism). At the same time highest growth of salaries, increasing growth of price of inputs and relatively hight inflation occurred in the Czech Republic (but still not at the usually accepted rate of galloping inflation).

The spring coronavirus shock affected these negative factors in different ways and these opposing tendencies are visible in our survey too. Before the outbreak of the pandemic and the adoption of special measures, our economy still had slight growth pace. The pandemic decreased the revenues of companies and citizens, the rate of profits and contracts decreased, and economic uncertainty increased.

Obviously, the expectations in the area of contract development are deteriorating. In the same way, the evaluation of domestic and foreign demand is also declining. Reflection in the current situation is visible in worsening of corporate investment. This reaction is based on deterioration in overall development, lower profit ratio, and caution in the business environment.

Growth of wages just reached the celling in 1st quarter 2020 and the growth pace is weakening – this is the expected trend as well for following quarters. Based on survey there is deceleration in the wages area. From the maximum predicted values of growth of wages (high above 3%) for next quarter and for whole year 2020 (above 4%) is now anticipation for growth in this area lower. Current expectations from 2nd quarter shows growth of 2,54% for one following quarter and 3,35% for the whole year 2020.

For 2021 there is the expectation based on our survey at the level of 2,95% (estimates from our survey do not take into account wages benefits such as overtime work, 13th salary, the influence of statutory minimum wage, etc.). The peak of expectation at labour market was based on our survey in the 1st quarter. Starting in the 2nd quarter there will be a decrease in the pressures in the labour market after reaching the ceiling.

The whole survey you can read here.