December 19, 2017 / 10:02 AM / a month ago

Euro zone wage growth pulls back from two-year high

    BRUSSELS, Dec 19 (Reuters) - Euro zone wage growth slowed in
the third quarter from a two-year high hit in the April-June
period, data released on Tuesday showed, offering little comfort
for the European Central Bank in its search for a pick-up in
inflation.
    Hourly labour costs rose by 1.6 percent year-on-year in the
July-September quarter, compared with 1.8 percent in the second
quarter, which had been the highest level since the first
quarter of 2016.
    Wages were also 1.6 percent higher year-on-year in the third
quarter from a 2.1 percent increase in the second, which had
been the highest rate since the first quarter of 2015.
    Weak consumer price inflation is a particular problem for
the ECB as it has undershot its nearly 2 percent inflation
target for over four years despite unprecedented stimulus and
will not reach its goal before the end of the decade.
    Inflation was 1.5 percent in November.
    The ECB increased its forecasts for euro zone growth and
nudged up its expectations for inflation next year to 1.4
percent from 1.2 percent and now sees the level at 1.7 percent
in 2020.             
    However, despite increased growth and inflation forecasts,
the ECB kept interest rates at rock bottom and stuck to its
pledge to keep money pouring into the euro zone economy.
            
    The ECB is keeping a close eye on wages, hoping that robust
economic growth and rapid job creation will finally push
earnings higher and give inflation a badly needed boost.
    Although employment has increased by nearly seven million
since its trough in 2013, wage growth has been limited for
years, a puzzling development for policymakers that suggests
sizable hidden unemployment.
    It may also signal that globalisation has diminished central
banks' control over inflation as supply, demand and labour
markets become international.
 
 For full details of Eurostat data click on: ec.europa.eu/eurostat

 (Reporting by Philip Blenkinsop; editing by Robert-Jan
Bartunek)
  
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