Euro zone wage growth pulls back from two-year high

Euro zone wage growth pulls back from two-year high
FILE PHOTO: European Union flags flutter outside the European Central Bank (ECB) headquarters in Frankfurt, Germany December 14, 2017. REUTERS/Ralph Orlowski/File Photo
Text size Aa Aa

BRUSSELS (Reuters) – Euro zone wage growth slowed in the third quarter from a two-year high hit in the April-June period, data released on Tuesday showed, offering little comfort for the European Central Bank in its search for a pick-up in inflation.

Hourly labour costs rose by 1.6 percent year-on-year in the July-September quarter, compared with 1.8 percent in the second quarter, which had been the highest level since the first quarter of 2016.

Wages were also 1.6 percent higher year-on-year in the third quarter from a 2.1 percent increase in the second, which had been the highest rate since the first quarter of 2015.

Weak consumer price inflation is a particular problem for the ECB as it has undershot its nearly 2 percent inflation target for over four years despite unprecedented stimulus and will not reach its goal before the end of the decade.

Inflation was 1.5 percent in November.

The ECB increased its forecasts for euro zone growth and nudged up its expectations for inflation next year to 1.4 percent from 1.2 percent and now sees the level at 1.7 percent in 2020.

However, despite increased growth and inflation forecasts, the ECB kept interest rates at rock bottom and stuck to its pledge to keep money pouring into the euro zone economy.

The ECB is keeping a close eye on wages, hoping that robust economic growth and rapid job creation will finally push earnings higher and give inflation a badly needed boost.

Although employment has increased by nearly seven million since its trough in 2013, wage growth has been limited for years, a puzzling development for policymakers that suggests sizable hidden unemployment.

It may also signal that globalisation has diminished central banks’ control over inflation as supply, demand and labour markets become international.

For full details of Eurostat data click on:

(Reporting by Philip Blenkinsop; editing by Robert-Jan Bartunek)

euronews provides breaking news articles from reuters as a service to its readers, but does not edit the articles it publishes. Articles appear on for a limited time.