Translated by Milo Dvorak
3. 6. 2024
Business Newsletter #39
Good morning,
Inflation and perhaps even the drop in purchasing power have been felt across all industries, though some surely have been luckier than others. Nonetheless, we're finally catching up, though we won't likely be at pre-pandemic levels any time soon yet.
Published by Aktualne.cz on 2 June 2024.
Czechs are Becoming Wealthier Again on Average. Wages are Rising Faster than Inflation This Year
The average wage in the Czech Republic increased faster than consumer prices in the first quarter of the year. In real terms, wages returned to growth after more than two years, analysts agree. However, they note that household purchasing power still lags behind pre-COVID-19 levels. The Czech Statistical Office (ČSÚ) will publish wage development data on Tuesday.
“In the first quarter of this year, wages grew year-on-year significantly in sectors such as trade, transport, accommodation and hospitality, with an estimated increase of about seven per cent. Information and communication activities, as well as industry, also saw substantial growth. Conversely, employees in agriculture and financial and insurance activities fared poorly, with year-on-year increases of only about two to three per cent,” said Cyrrus's chief economist, Vít Hradil.
“For the entire economy, we expect a year-on-year nominal increase in the average wage of 6.2 per cent, which corresponds to a real growth of approximately 4.2 per cent after accounting for inflation,” he added.
According to analysts from Česká spořitelna, nominal wages increased on average by six per cent, driven by low unemployment and economic recovery. “We expect a return to real wage growth from the first quarter of this year, influenced by both respectable nominal wage growth and a significant drop in inflation,” they added. According to their estimates, real wages increased by 3.9 per cent year-on-year, but have not yet reached pre-pandemic levels.
Komerční banka analysts echoed this sentiment. “Our forecast predicts that the average real wage will not reach pre-pandemic levels until 2026,” they stated.
Experts predict that wage growth will continue in the coming quarters. For the entire year, Česká spořitelna analysts expect real wages to increase by 3.9 per cent, while Komerční banka analysts anticipate a 4.2 per cent growth.
Real wages had decreased for nine consecutive quarters up to the last quarter of last year, an unprecedented occurrence in Czech history. In the fourth quarter of 2023, the average wage reached 46,013 CZK, representing a nominal year-on-year growth of 7.1 per cent but a real decrease of 1.2 per cent due to high inflation. Generally, two-thirds of employees do not reach the average wage. The median wage, the middle value of wages, was 39,685 CZK in the fourth quarter. The highest wages were in Prague whereas the lowest in the Karlovy Vary region.