EUROZONE DATA
The ECB’s negotiated wages indicator rose by 4.69% Y/Y, up from 4.45% in Q4. An acceleration had been expected by some analysts following yesterday’s German March negotiated wages data (which were 11.7% Y/Y vs 5.9% in Feb).
- Prior to the German data, general consensus was for a modest deceleration to around 4.3% Y/Y. However, we note that the German data was inflated by one-off payments but still showed underlying strength.
- Taken alongside the preliminary Q1 labour cost index on Tuesday (which was 4.9% Y/Y vs 3.4% in Q4), this suggests upside risks to overall Eurozone compensation per employee and by extension unit labour costs – both released as part of the full national accounts on June 7.
- However, the ECB Governing Council still expect a gradual moderation in wage growth in the quarters ahead (e.g. Schnabel yesterday evening).
- From the ECB’s blog on negotiated wages: “Negotiated wage growth is expected to remain elevated in 2024, which is in line with the persistence that has been factored into Eurosystem staff forecasts and reflects the multi-year adjustment process for wages. However, wage pressures look set to decelerate in 2024”.
- The Indeed wage tracker has continued to moderate through 2024, which should be reflected in the negotiated wage and compensation per employee data going forward.
- ECB-dated OIS contracts were little changed following the release, currently pricing 23bps of cuts through the June meeting and a cumulative 26bps through July.
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