Eurozone companies expect wage increases to moderate, ECB says
COMPANIES in the euro area expect wage growth to slow, according to a poll by the European Central Bank, offering policymakers some comfort that inflation is safely in retreat.
Salaries are expected to rise 3.8 per cent over the next 12 months, the ECB said on Monday (Apr 8) in its Survey on the Access to Finance of Enterprises. That is down from 4.5 per cent in the previous poll in November. Selling-price expectations fell even more strongly – to 3.3 per cent from 4.5 per cent.
Workers’ pay is a key variable for ECB officials as they decide how soon and how quickly to lower interest rates. They are widely predicted to stand pat at this week’s meeting, with a first cut anticipated in June, when more assurance that wage pressures are easing is likely to be available.
The concern is that higher salaries will be passed on to consumers, keeping inflation above the 2 per cent target for longer. While other indicators have signalled a slowdown in wage growth at the end of 2023, policymakers are keen to see data for the first quarter.
The ECB’s survey also showed that financing conditions tightened further in the first quarter of 2024, but much less than in the fourth quarter of 2023.
Companies reported a modest reduction in the need for loans, while fewer reported a reduction in their availability.
Firms perceived the general economic outlook to be the main factor hampering the availability of external financing, albeit slightly less so than in the previous round. BLOOMBERG
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