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Wages in the eurozone picked up in the first quarter, ECB says

By Steve Goldstein

Negotiated wages edged higher in the eurozone in the first quarter in data that could limit the pace of interest rate cuts by the European Central Bank, which are expected to start next month.

The ECB said negotiated wages rose 4.7% year-over-year in the first quarter, after a 4.5% increase in the fourth quarter.

The report is based on data from nine countries - Belgium, Germany, Spain, France, Italy, Netherlands, Austria, Portugal and Finland - and includes the impact of one-off payments.

ECB economists Sarah Holton and Gerrit Koester in a blog post said they expect negotiated wage growth to remain elevated in 2024, but that wage pressures are set to decelerate.

Data from the recruiter Indeed has decreased shows wages have slowed from its peak of 5.1% in Oct. 2022 to 3.4% in April 2024, and firms that participated in the ECB's telephone survey in March shows that companies expect wage growth to slow to 4.3% this year from 5.4% last year.

Paul Hollingsworth, chief Europe economist at BNP Paribas, said the news doesn't jeopardize a June rate cut, but makes a subsequent July decrease "very unlikely."

The yield on the 2-year German bond BX:TMBMKDE-02Y edged up 2 basis points to 3.04%.

Elsewhere, the flash eurozone composite PMI accelerated to a 12-month high of 52.3 in May from 51.7 in April. Rates of inflation of both input costs and output prices softened from April, but remained above pre-pandemic averages in each case, said S&P Global.

-Steve Goldstein

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05-23-24 0927ET

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