German wages rose by most in three decades in Q3
Q3 negotiated pay, including ancillary agreements, jumped 8.8% from a year ago – the quickest rate since 1993
GERMANY recorded the strongest wage growth in more than three decades despite its economy being mired in stagnation, according to the Bundesbank.
Third-quarter negotiated pay, including ancillary agreements, jumped 8.8 per cent from a year ago – the quickest rate since 1993, the central bank said on Tuesday (Nov 19) in its monthly report. Even excluding special payments, wages gained 5.6 per cent.
That pace is unlikely to last, however, with the Bundesbank saying the period may have marked the peak for wage increases.
The data come a day before crucial euro-area pay figures that will help shape the path for European Central Bank monetary policy following a widely expected cut in the deposit rate at December’s meeting.
Some analysts predict a sharp increase – not least because of developments in Germany. That may keep some policymakers cautious on more rapid and aggressive easing, though others fret about the region’s struggles to boost output.
At home, the Bundesbank expects Europe’s largest economy to stagnate this quarter after unexpected growth in the third. At the same time, inflation will probably accelerate sharply due to base effects.
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“Economic weakness in the German economy is likely to continue,” the report said. “Factors such as high uncertainty, comparatively high financing costs and low capacity utilisation in industry that are weighing on investment propensity continue to exist.”
Germany dodged a recession in the third quarter, expanding by 0.2 per cent. But “it’s difficult to infer improving underlying momentum” from that performance given it fared far worse than initially reported in the previous period, the Bundesbank said.
Looking ahead, it pointed to signs of a recovery in foreign demand and said private consumption may pick up somewhat, bolstered by steep wage gains even as the labour market deteriorates.
“However, consumers remain uncertain and are likely to be reluctant to take advantage of these additional spending opportunities,” it said. BLOOMBERG
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