German negotiated wages rise at 3.2% in 2014

[BERLIN] German negotiated wages including special payments climbed by 3.2 per cent on average last year - the biggest increase since the statistics were first compiled in 2010 - boding well for private consumption to drive growth this year.

The Federal Statistics Office revised up its original estimate by 0.1 percentage points. Wages for the roughly 19 million workers covered by negotiated wage deals rose more than three times as steeply as inflation, which was at 0.9 per cent on average last year.

The increase was far stronger than in 2013, when workers under collective wage agreements had a 2.4 per cent pay hike and in 2012, when their paychecks increased by 2.7 per cent.

Rising wages, a stable labour market and lower oil prices are helping to boost household spending in Europe's largest economy.

Private consumption was the main driver of growth in the fourth quarter of 2014 and with consumer morale at its highest in more than 13 years, there is no sign of that abating, especially as Germany's biggest trade union won an inflation-busting wage deal earlier this week.

Engineering union IG Metall secured a 3.4 per cent wage increase for 15 months from April plus a one-off payment of 150 euros in a deal that is likely to benefit 3.7 million workers. The head of IG Metall union's southwest region said that was the biggest real wage increase for years.


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