Research Briefing | Jan 13, 2022

Solid pay rebound won’t trigger a wage-price spiral in the eurozone

Ipad Frame - Eurozone-Solid-pay-rebound-wont-trigger-a-wage-price-spiral

We expect the solid recovery of the labour market and the lagged impact from the 2021 inflation surge to trigger a sharp pick-up in wage growth in the eurozone.

What you will learn:

  • According to our modelling, after slowing to a record low of 1.4% y/y in Q3 2021 and averaging only around 1.5% across 2021, negotiated wages will rise to 2.6% in 2022 – the highest rate for the eurozone since 2009.
  • But after this burst, we think wage growth will slow steadily from 2023 as structurally high unemployment in parts of the eurozone and firmly anchored inflation expectations will weigh on workers’ bargaining power.
  • Risks surrounding our wage forecast are tilted moderately to the upside.
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