April 6 (Reuters) - Nominal wages in Czech industry rose
by double-digits for a second straight month in February,
increasing 10.8% after an 11.9% rise in January, a pace that is
likely to draw central bankers' scrutiny.
The Czech National Bank (CNB) has held off on any rate
changes since ending a year-long hiking cycle in the middle of
2022 but has not rushed to begin loosening policy, with
inflation still above 16%.
It has even warned that a further hike to its 7.00% base
rate cannot be ruled out. It is keeping an eye out for demand
pressures to resurface, especially from any pickup in wages,
noting specifically "significant increases" in nominal wages in
industry and construction in January at its last policy meeting
on March 29.
While wages have fallen sharply in real terms over the past
year because of inflation, nominal growth is picking up pace,
witnessed in monthly developments in industry.
"The average nominal wage of employees in industry increased
at a double-digit rate for the second month in a row," UniCredit
economist Patrik Rozumbersky said.
"This may raise the CNB's attention and revive thoughts of
further interest rate hikes."
Markets are expecting the central bank to begin cutting
interest rates sometime in the second half of the year, although
Governor Ales Michl said after the last policy meeting that a
peak on rates may not have been reached and expectations on the
timing of the first cut were premature.
Overall, industrial output climbed 2.0% year-on-year in
February after starting 2023 with a decline.
A rebound in the car sector, despite some shutdowns at
plants due to parts issues, was a driver, the statistics office
said. Month-on-month, output increased 0.4%.
The Czech economy, boasting the lowest unemployment rate in
the European Union, slipped into a mild, technical recession in
the second half of 2022, with consumer demand hit hard by high
inflation eating into household budgets.
The central bank expects the economy to contract 0.3%
overall in 2023, after a 2.5% increase in 2022.
(Reporting by Jason Hovet and Robert Muller; Editing by
Christina Fincher)
