BRUSSELS—Eurozone labor costs jumped in the last three months of 2022 and third-quarter data was revised up as well, but the rise of the wage component was still roughly half the increase in consumer inflation, data showed on Friday.
The European Union’s statistics office Eurostat said labor costs in the 19 countries that shared the euro in the last quarter of 2022 rose 5.7 percent year-on-year, with wages up 5.1 percent and non-wage labor costs up 7.7 percent.
Labor costs were revised upwards to 3.7 percent year-on-year from 2.9 percent reported earlier and wage growth to 3.0 percent from 2.1 percent
Consumer inflation was 9.2 percent year-on-year in December, down from 10.1 percent in November and 10.6 percent in October, giving an average of 10 percent for the quarter.
Eurozone wages grew fastest in construction, up 6.5 percent in the fourth quarter against the same period of 2021, followed by services, where pay rose 5.7 percent with industry up only 4.4 percent.
The ECB watches labor costs to determine how much of the energy price shock caused by Ukraine’s conflict filtered through to other areas of the economy and whether rampant inflation becomes entrenched by increasing so-called core inflation, which excludes volatile energy and food prices.
In February, core inflation rose to 5.6 percent year-on-year from 5.3 percent in January, setting itself on a trajectory to match the higher costs of labor, in a sign the ECB may need to be more determined with rate increases to bring it down.
Headline inflation is seen averaging 5.3 percent this year, 2.9 percent in 2024, and 2.1 percent in 2025, the ECB said, adding that these projections were finalized before the current turmoil linked to the collapse of the SVB bank in the United States and share price troubles of Credit Suisse in Europe.
ECB policymakers have said that wage growth in the 5–6 percent range this year still only represented a catch-up after inflation eroded the real value of incomes, but such wage growth was still inconsistent with the ECB’s 2 percent inflation target.