Data from Statistics Estonia show that the average gross monthly wage was up 4.8% in the second quarter of 2014, and the gross hourly wage by 8.8%. The sizeable difference between the growth rates of monthly and hourly wages indicates that less was paid in bonuses and benefits, which can be seen as the flexible part of wages. Quarterly growth in average wages continued to slow in seasonally adjusted terms, reflecting an adjustment to the weak economic environment and productivity.

Average wage growth was also slowed by increased declaration of wages in sectors where wages are below average, such as catering and accommodation services, and agriculture, where Statistics Estonia reports that employment was more than 10% higher than last year. The effect of employers anticipating the upcoming registration of employees could already be felt in the second quarter.

Wage growth has also slowed in sectors that are exposed to risks from the external environment. Average wages in manufacturing rose by 4.9%, and those in transportation and storage by 2.4%. Exporting companies are less able to increase their labour costs than companies serving domestic demand are, as external competition makes it harder for them to pass higher costs into product prices.

The impact of large collective wage agreements passing out of the comparison base and increased uncertainty will together mean that wage growth is more likely to slow in the near future. The Eesti Pank June forecast expects that if external demand recovers, wage growth in the coming years will be 6-7%. This is in line with Estonia's potential for economic growth of 3-4%.

Eesti Pank observes and comments on wage developments as labour costs have a direct impact on the price of goods and services produced in Estonia and wage growth is an important indicator of price stability.

Photographs of spokespeople from Eesti Pank can be found in the photo bank at www.eestipank.ee/press/fotopank.