New wage growth weakened in October, down to 0.7% y/y in real terms, a three-month low, according to figures of the statistical office. As in previous months, the private sector led the deterioration, with wages staying flat in real terms. There will be a certain inflationary impact this year, given that headline inflation will pick up towards late 2016 and early 2017 due to the expiring effect of oil prices. Even then, nominal wage growth in the private sector has weakened, something not really seen in the public sector, where net wage growth remained relatively stable in real terms over the past three months. The latter is due mostly to more frequent income indexations, as well as due to growing pressure from trade unions for stronger wage gains.
Deterioration in private sector wages was broadly based, as it was reported not only in manufacturing and utilities, but also in the financial sector and IT, where incomes are usually higher. While this is favorable regarding labor cost growth, it does imply that private sector incomes will grow only modestly, if at all in real terms, which is why private consumption projections have not been very optimistic lately. In a sharp contrast, net wages in the public sector, excluding education and healthcare, saw at least 4% y/y growth in real terms, which explains why the government has been so adamant with public sector unions.