skip to main content

Pay figures boost ECB rates case

ECB - Inflation alarm bells
ECB - Inflation alarm bells

Official figures show that growth in euro zone labour costs accelerated in the first quarter of this year.

The data from Eurostat also suggest that the area's inflation last month may have been even higher than estimated, raising the odds for an ECB rate increase in July.

Hourly labour costs in the euro zone rose at an annual rate of 3.3%, up from an upwardly revised 2.9% in the fourth quarter of last year. The wages and salaries component of hourly costs rose even more strongly - at an annual rate of 3.7% compared with 3.2% in the previous quarter. Irish figures were not included as they are not yet available.

Over the last two days Germany revised upwards its inflation data for May, France and Ireland reported price growth above expectations, Spain's inflation reached its highest since 1995 and Italy confirmed inflation reached its highest since 2001.

The EU statistics office, Eurostat, on May 30 estimated May inflation in the whole euro zone at 3.6%, but now economists expect an upward revision to 3.7% - almost double the ECB's target - on Monday.

The ECB wants inflation to be just below 2% in the medium term, and said last week it may raise interest rates on July 3 to combat inflation. The bank has repeatedly expressed concerns that soaring food and fuel prices could spark a wage spiral.