Czech Real Wages Slow in Q2, but Purchasing Power Remains Robust
Czech Republic: In the second quarter, the average real wage in the Czech Republic decelerated, falling below market expectations due to softened nominal wage increases and higher consumer inflation. Average nominal wages grew by 6.5%, a decline from nearly 9% at the start of 2023. Real wages rose by 3.9%, but some sectors saw no real wage growth compared to the previous year. Despite the slowdown, real purchasing power remains strong, supporting household spending.
Annual real wage growth, while lower than the 4.7% average seen during the economic upswing of 2016-2019, is expected to drive recovery in household expenditure. The Czech National Bank (CNB) anticipated a 7.2% increase in nominal wages and a 4.6% rise in real wages for Q2, but the actual figures were lower. This reduces the risk of a wage-price spiral and may prompt further easing in monetary policy, with potential rate cuts expected this year. However, concerns remain due to weak demand from Czechia’s main trading partners and deteriorating manufacturing output, as indicated by the August PMI.
Source: ING