Q2 wages in the euro area grow at the weakest pace in six years

Wages in the euro area grew at the weakest pace in almost six years, during the three months ended June, a signal that the common currency zone is struggling the odds of a muted economic recovery, a phase of worry for the policymakers at the European Central Bank (ECB).

Eurozone hourly wage costs rose 1.0 percent in the year during the second quarter of 2016, a significant slowdown from the 1.6 percent recorded for the first quarter. The second-quarter data equalled the series’ low witnessed during 2013 and will reinforce ECB concerns surrounding second-round inflation effects.

Further, a significant slowdown was witnessed in the wages and salaries per hour component to 0.9 percent from 1.7 percent previously, while the non-wage component increased slightly to 1.4 percent from 1.5 percent previously. Labour costs rose 0.9 percent in the industry, 1.5 percent in construction and 0.9 percent in services.

Also, annual declines were observed in Italy, Finland and Luxembourg, according to the latest data released. Moreover, Spain, Belgium, the Netherlands and Ireland registered weak readings in the core Eurozone economies, below 1 percent.

Although there was no significant reaction in asset prices, but comments from ECB officials will continue to be monitored closely in the short term. Meanwhile, inflationary pressures also remain subdued, with consumer prices hitting just 0.4 percent last month, held back by falling energy costs.