Eurozone companies expect wages to rise by more than 3%, according to the ECB

Frankfurt-Eurozone companies expect wages to rise by more than 3% this year as workers demand compensation for inflation and it becomes more difficult to find staff such as builders and software engineers. The European Central Bank said on Friday.

Wage growth is an important indicator for the ECB to assess future inflation paths and set the timing for the first rate hike in more than a decade.

The ECB spoke with 74 large companies operating in the euro area outside the financial sector in mid-January, and after almost a freeze over the past two years, labor market conditions will tighten and wages will rise. I found that it was expected to happen.

“Usually, contacts expect average wages to rise from about 2% recently to more than 3% this year,” the ECB said in a report.

“Significantly higher wage inflation was explained or expected in relation to jobs where recruiting and retaining staff was a challenge, such as in the field of construction and road transport, IT professionals and software engineers.”

The two companies told the ECB that demand was strong or growing, but struggled to meet demand due to supply constraints, a side effect of measures designed to combat the coronavirus pandemic. rice field.

In the fourth quarter of last year, just under half of the companies reported increased activity. This is a lower percentage than the previous survey three months ago.

Regarding prices, the percentage of companies reporting an increase decreased, but maintained more than half of the total.

“Many contacts have said prices have been adjusted more often than before to avoid margin pressures, and prices will continue to rise throughout most of 2022,” the ECB said.

The ECB finally acknowledged rising inflation risk at its policy meeting on Thursday, opening the door to raising interest rates this year and bringing a remarkable policy shift to one of the world’s most dovish central banks.