September 15, 2017 / 9:10 AM / a year ago

Euro zone wage growth hits two-year high in Q2

    BRUSSELS, Sept 15 (Reuters) - Euro zone wages grew at their
fastest rate in two years in the second quarter, data released
on Friday showed, providing some comfort for the European
Central Bank in its search for a pick-up in inflation.
    Hourly labour costs rose by 1.8 percent in the April-June
period, from a revised 1.4 percent in the first quarter, its
highest growth since the first quarter of 2016, EU statistics
office Eurostat said.
    Wages were 2.0 percent higher year-on-year in the second
quarter from 1.3 percent in the first, 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. The rate
was 1.5 percent in August.
    It is now debating whether to ease back on stimulus, a
decision likely to come in October, accepting that more patience
is needed to lift inflation. 
    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 barely visible
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.
    Wage talks by IG Metall, Germany’s biggest union with 2.3
million workers, will be keenly watched by policymakers as the
deal will influence wage setting across several key sectors in
the euro zone’s biggest economy. Although the union will publish
its initial demands in October, no deal is expected until early
next year.   
    For full details of Eurostat data click on:

 (Reporting by Philip Blenkinsop and Balazs Koranyi)
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