Indicator Digest - CMS Forex

Wages

Following the changes in workers wages is an important factor to overall inflation. As salaries increase, consumers spend more, and thereby exert upward pressure on retail prices. Higher wages also improve consumer sentiment and bolster overall economic growth.

Main Indicator: Labor Cost Index y/y

Most Recent Release

June
13th, 2008

Actual

Forecast

Revised Form

3.3%

2.9%

2.7%

For 1st Quarter
Provided by: EuroStat
Official Release: PDF

Labor costs grew 3.3% in the first quarter, the fastest rate since 2003. The increase was larger than forecast, as workers are negotiating higher salaries in the face of higher inflation. This is exactly the scenario the ECB spelled out in its monthly report, in that higher inflation will cause second-round effects such as wages to rise in an inflation spiral. ECB President Trichet signaled that recent data had caused a discussion in the last meeting where several members pressed for an interest rate increase in July.

From the Release: "Total hourly labour costs in the euro area rose by 3.3% in nominal terms in the year up to the first quarter of 2008, compared with 2.9% for the previous quarter. The two main components of labour costs are wages & salaries and non-wage costs. In the euro area, wages & salaries grew by 3.7% in the year up to the first quarter of 2008, and non-wage costs by 2.3%, compared with 3.2% and 2.0% respectively for the fourth quarter of 2007. The breakdown by economic activity shows that in the euro area hourly labour costs rose at an annual rate of 3.7% in industry, 4.0% in construction and 3.0% in services up to the first quarter of 2008."

Table of Past Data

	12/15	9/14	12/14	6/14	9/12	12/13	3/14	6/13

Actual	2.20%	2.40%	2.00%	2.20%	2.5%	2.5%	2.7%	3.3%
Forecast	2.40%	2.30%	2.50%		2.3%	2.6%	2.5%	2.9%
Previous	2.30%	2.20%	2.40%	2.20%	2.2%	2.4%	2.5%	2.9%
Revised From	N/A	N/A	N/A	N/A	N/A	2.5%	N/A	2.7%

Past Releases

March
14th, 2008

Actual

Forecast

Revised Form

2.7%

2.5%

N/A

For 4th Quarter

Labor Costs increased by 2.7% in the 4th quarter, higher than economists forecasts. Wages were up 2.9%. The higher than expected wages along with a 14-year high consumer-price inflation will limit the chances of the ECB lowering rates in the near future, which they may be inclined to do if the policy members see evidence of the euro-zone economy slowing down. Right now, the bank's main concern is keeping inflation in check.

December
13th, 2007

Actual

Forecast

Revised Form

2.5%

2.6%

2.4%

2.5%

For 3rd Quarter.

September
12th, 2007

Actual

Forecast

Revised Form

2.5%

2.3%

2.2%

N/A

Total hourly labor costs in the euro area rose at an annual rate of 2.5% in nominal terms up tho the second quarter of 2007, according to Eurostat. Wages and salaries grew at an annual rate of 2.5%, and non-wage costs by 1.8%, compared with 2.3% and 1.9% respectively for the first quarter of 2.7%. Labor costs increased the most in construction (3.2%) and least in services (2.2%).

June
14th, 2007

Actual

Forecast

Revised Form

2.20%

N/A

The 2 components wages & salaries and non-wage costs grew respectively 2.30% and 2.10% annually up to the first quarter of 2007 according to Eurostat.

December
14th, 2006

Actual

Forecast

Revised Form

2.00%

2.50%

2.40%

N/A

September
14th, 2006

Actual

Forecast

Revised Form

2.40%

2.30%

2.20%

N/A

Eurozone employment rose by 0.4% in Q2 q/q and increased by 1.2% on a y/y basis. On the other hand, labor cost was up by 2.4% in Q2 y/y. The employment numbers rose by 557,000 from the first quarter to a total of 139m. The figures were released by Eurostat.

December
15th, 2005

Actual

Forecast

Revised Form

2.20%

2.40%

2.30%

N/A