FRANKFURT, June 8 (Reuters) – Eurozone wages are rising but some rises could be fleeting as employers choose to hand out one-off bonuses rather than permanent increases amid an uncertain outlook for growth and inflation .
This trend, frustrating for employees faced with a rapid erosion of their purchasing power in the face of high inflation – more than 8% increase in prices on an annual basis for the month of May -, should on the other hand reassure the European Central Bank which fears the formation of a price/wage spiral that is difficult to stem.
Renegotiations between employers and employees led to a 2.8% rise in wages in the first quarter in the nineteen countries of the euro zone, their fastest pace since the start of 2009, driven by a 4% increase in Germany , the first economy in the bloc.
However, excluding bonuses and other one-off payments, Germany’s rise was only around 2%, suggesting that companies raised wages to a limited extent. A trend that can be found in Italy, France or the Netherlands.
“In the upcoming wage negotiations, uncertainty about the development of the economy and concerns about possible job losses could dampen wage increases,” the Bundesbank said.
The ECB has long maintained that wage growth of 2-3% is compatible with an inflation rate of 2%, its medium-term objective.
Few predict that wages will rise much beyond this range, but persistent inflation could end up giving unions the power to demand higher wages.
“We expect further increases over the next few quarters, but not enough to offset inflation, which would lead to sharply negative real wage growth,” said Morgan Stanley.
“Accelerating nominal wage growth should nevertheless support underlying inflation over the longer term, and make services the main driver of our forecast for 2023.” (Report Balazs Koranyi in Frankfurt, Leigh Thomas and Caroline Pailliez in Paris, Francesco Zecchini and Gavin Jones in Rome, Toby Sterling in Amsterdam and Belen Carreno in Madrid; French version Augustin Turpin, edited by Jean-Stéphane BRosse)