The pace of eurozone wage rises slows down

Labour costs in the eurozone rose at their slowest pace in four years in the second quarter in a sign that the bloc’s indebted economies are becoming more competitive, while inflation in August remained low.

Nominal hourly labour costs in the 17 countries using the euro grew by 0.9 per cent in the April-to-June period, following a 1.7 per cent increase in the first quarter, the EU’s statistics office Eurostat said yesterday.

Eurostat also said consumer prices in the eurozone edged up by 0.1 per cent on the month in August, following a 0.5 per cent drop in July. Annual consumer price inflation fell to 1.3 per cent from 1.6 per cent in July.

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Inflation remains well below the European Central Bank’s target of close but below 2 per cent, warranting the bank’s pledge to keep interest rates at current levels or lower for an extended period of time to help the recovery.

ECB President Mario Draghi said that the eurozone’s economy, which ended its recession in the second quarter, remained “fragile” and unemployment was “still far too high”.

In one positive sign, Ireland and Portugal, which are seeking to end their international financial aid programmes in the coming months, saw labour costs rising at a pace that was slower than the bloc’s average.

In Italy, labour costs slowed their rise to 0.6 per cent from 2.5 per cent in the first quarter. Spain reported a 0.3 per cent fall in labour costs. In Germany, which produces more than half of the eurozone’s exports, labour costs grew 1.8 per cent, down from the 3.7 per cent jump in the first quarter.