Eurozone wages jumped in the first quarter, data showed, raising the spectre of a wage-price spiral that would increase the chances for an ECB rate rise in July amid signs inflation in May could set a new record high.
Hourly labour costs in the 15 countries using the euro rose 3.3 percent year-on-year, up from an upwardly revised 2.9 percent in the fourth quarter of last year and 2.6 percent in the third, the European Union statistics office said on Friday.
The wages and salaries component of hourly costs rose even more strongly - 3.7 percent year-on-year against 3.2 percent the quarter before and 2.8 percent two quarters earlier. The ECB, which wants to keep inflation below, but close to 2 percent, warned last week it may raise rates on July 3 to anchor inflation expectations amid surging oil and food prices.
Germany revised upwards its inflation data for May, France and Ireland reported price growth above expectations, Spain's inflation reached its highest since 1995 and Italy confirmed the fastest price growth since 2001. On May 30 Eurostat estimated May euro zone inflation at 3.6 percent, but now economists expect an upward revision to 3.7 percent - almost double the ECB target - on June 16.
Eurostat data also showed employment growth in the euro zone remained stable at 0.3 percent quarter-on-quarter in the first quarter but slowed to 1.6 percent year-on-year from 1.8 percent in the fourth quarter of 2007 and 1.9 percent in the third. Friday's data showed, however, that Germany still had the biggest restraint in wage growth, with hourly labour costs in the eurozone's biggest economy rising only 1.6 percent and wages by 2.3 percent in the first quarter.