Significant Wage Growth Expected to Slow Accord to ECB
Eurozone Wage Growth Expected to Moderate in 2025, according to ECB
The European Central Bank (ECB) has forecast a considerable deceleration in wage growth within the Eurozone this year. The bank's estimation is underpinned by its wage indicator, which suggests that the rate of wage growth will contract from 4.8 percent in 2024 to 3.1 percent in 2025.
Published on Wednesday, the indicator is based on agreed wage agreements and gives insight into inflation dynamics within the 20-member community. The trend shows a milder downturn when excluding one-off payments, with wage growth slowing to 3.8 percent from an estimated 4.2 percent in 2024.
Recent wage growth trajectory in the Euro Area, notably in Germany, peaked in Q3 2024, reaching 5.42 percent, the highest since Q1 1993. Since then, the growth has begun to abate, registering 2.38 percent in Q1 2025. This slowdown aligns with the ECB's projections, anticipating a softening of wage pressures following a retreat from high inflation rates.
The ECB's chief economist, Philip Lane, is confident that wage pressures will persistently ease as wages recover from previous inflationary losses. Economic conditions, including moderate growth rates and ongoing trade tensions, also contribute to the projected decline in wage growth.
(Source: ECB, Bloomberg, Reuters)
Financing strategies among businesses might be influenced by the anticipated decrease in wage growth, as suggested by the European Central Bank. This slowdown in wage growth could potentially impact the overall inflation rate within the Eurozone in the coming year.
