Chart of the Week
The ECB has just published its estimate of the progression in European wages negotiated by collective agreement in the first quarter. Although a decline was anticipated, the level remains high, at +4.7%. Will this data prevent the ECB from cutting rates in June?
OUR ANALYSIS
This metric considers only wage trends stemming from collective agreements in European companies. Numerous other factors can impact overall wage growth. Additionally, collective negotiations often span multiple years. The ECB provides an estimation of the progression of wages based on the entire period covered by collective agreements, including increases spread over several quarters or years. In a blog post accompanying the first quarter data release, ECB economists note that this trajectory is now lower than what was estimated last December.
The second point that puts this figure into perspective is that it seems to be connected with a particularly strong trend in Germany, linked to exceptional payments in this quarter. Lastly, the payrolls tracker for new job postings, published by the Central Bank of Ireland, slowed again in April.
It therefore seems unlikely that this higher-than-expected statistic will prevent the ECB from cutting rates in June, given statements from several Monetary Policy Committee members in favour of such a move. However, if wages were to slow less quickly than expected, that might cause the ECB to hold off longer before lowering its rates once more.
***
Written on May 24, 2024. This is not an investment advice. Opinions subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/tokyo-to-the-rescue/
This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – a simplified joint stock company with share capital of €14,487,500 – Paris Trade and Companies Registry No. 352 213 599. 25, RUE DE COURCELLES – 75008 PARIS, FRANCE
