9 Jun 2015
Euro area wage growth to remain very low – Nomura
FXStreet (Barcelona) - Research Analysts at Nomura expected the euro area wages to remain subdued in the medium-term, in spite of the economic recovery.
Key Quotes
“Euro area negotiated wage growth slowed to 1.5% y-o-y in Q1 from 1.7% y-o-y in H2 2014 and 1.9% in Q2, registering the lowest reading since 1992. By country, the main drag came from Germany, France and Belgium, while there was some stabilisation in Italy, Spain and the Netherlands.”
“The weak German wage growth in Q1 is mainly owing to the smaller wage hike in the public sector, the missing one-off payment in the retail sector and timing shifts in wage increases in certain sectors. Also, preliminary evidence suggests the impact of the minimum wage looks to have been very limited. For the whole of 2015, the agreed wage rates seem broadly in line with that of 2014, signalling similar wage growth to last year in Germany of around 3%.”
“The outlook for wage growth in the euro area remains the single-most important driver of domestically-generated inflation and thus of core inflation and future ECB policy. The significant downward revision to the ECB’s forecast of wage growth is the first hint that its view on underlying inflation is too optimistic.”
“We expect euro area negotiated wages to have reached a low point, but to remain subdued in the medium term, around 1.7% over the next two years.”
Key Quotes
“Euro area negotiated wage growth slowed to 1.5% y-o-y in Q1 from 1.7% y-o-y in H2 2014 and 1.9% in Q2, registering the lowest reading since 1992. By country, the main drag came from Germany, France and Belgium, while there was some stabilisation in Italy, Spain and the Netherlands.”
“The weak German wage growth in Q1 is mainly owing to the smaller wage hike in the public sector, the missing one-off payment in the retail sector and timing shifts in wage increases in certain sectors. Also, preliminary evidence suggests the impact of the minimum wage looks to have been very limited. For the whole of 2015, the agreed wage rates seem broadly in line with that of 2014, signalling similar wage growth to last year in Germany of around 3%.”
“The outlook for wage growth in the euro area remains the single-most important driver of domestically-generated inflation and thus of core inflation and future ECB policy. The significant downward revision to the ECB’s forecast of wage growth is the first hint that its view on underlying inflation is too optimistic.”
“We expect euro area negotiated wages to have reached a low point, but to remain subdued in the medium term, around 1.7% over the next two years.”