FRANKFURT (MNI) – Germany’s labour cost growth slowed in 2Q,
reflecting the trend in both salaries and wages and social
contributions, the Federal Labour Office reported on Wednesday.

From 1Q to 2Q, the labour cost index increased 0.4%, reducing the
annual growth rate to +0.5%.

Gross salaries and wages saw a quarterly gain of 0.4%, down
modestly from the previous period, leaving the annual change also at
+0.4%. Social contributions saw a more pronounced deceleration, with
only a 0.1% increase since 1Q, for a 1.0% rise on the year.

In his introductory statement given earlier this month, European
Central Bank President Jean-Claude Trichet highlighted the moderate
labour cost gains in Germany and suggested that this was at least part
of the reason for the country’s robust labour market.

However, while workers’ pay has managed only moderate annual growth
since late 2009, upcoming wage negotiations could lead to a significant
boost, as unions shift their focus away from job security and wage
moderation.

In a newspaper interview published late last month, German
Federation of Trade Unions (DGB) President Michael Sommer stressed that
it was “the turn of our people” to benefit as firms have during the
economic recovery, while German steel workers’ union IG Metall had said
it would push for a 6% rise in salaries for around 85,000 workers when
pay negotiations begin this September.

“All employees must profit from the upswing,” IG Metall negotiation
leader Oliver Burkhard said.

With unemployment falling for the 14th consecutive month in
Germany, while ongoing growth in work backlogs led to the private sector
increasing staff levels yet again, unions’ are certainly gaining a
favourable bargaining position.

According to Markit Economics’ latest purchasing managers index
(PMI) release, both the manufacturing and services sector reported
further increases in employment in August, with hiring in the latter
sector rising above the long-run average.

The employment outlook among firms polled by the European
Commission were equally optimistic, with manufacturers’ and service
providers’ hiring expectations rising to their highest levels since May
2008 and January 2008, respectively.

However, while surveys point to further declines in the number of
jobless, analysts advise caution, noting austerity measures set to come
into play next year.

“And with global demand already slowing, firms may well be
reluctant to take on more workers despite the recent pick-up in
activity,” Capital Economics’ senior economist Jennifer McKeown said.
“In all, then, while the latest data are encouraging, it is much too
soon to bank on a consumer revival and we see the German recovery
stalling as export growth slows in the coming quarters.”

— Frankfurt newsroom: +49 69 720 142 Email: frankfurt@marketnews.com —

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