Germany wage growth slows to 3.1% in Q2

Germany’s negotiated wage growth eased to 3.1 per cent in the second quarter of 2024, down from 6.2 per cent in the first quarter, according to Bundesbank data. This slowdown could support the European Central Bank‘s (ECB) rate cut decision in September.

“Inflation compensation bonuses that had been paid out in the previous year were discontinued, which dampened the year-on-year rate.” Bundesbank stated.

While overall wage growth decelerated, rates excluding one-time factors accelerated to 4.2 per cent, up from 3.0 per cent previously. Monthly figures showed a decrease to 4.1 per cent in June from 4.7 per cent in May.

“Permanent wage increases are gaining in importance. From a long-term perspective, the high growth in actual earnings is continuing.”

Markets are anticipating a 25-basis-point rate cut, following comments from Finnish central bank chief Olli Rehn suggesting weak economic growth may justify easing.

The ECB aims to bring inflation down to 2 per cent and forecasts a decline in compensation growth to 3.2 per cent by 2026.